author: MINGE, Judge.

text:
    Judy L. LOPPE, f/k/a Judy L. Bethel, Appellant, v. Bradley J. STEINER, Respondent.
    No. A04-2012.
    Court of Appeals of Minnesota.
    July 19, 2005.

      John G. Westrick, Westrick & McDo-wall-Nix, P.L.L.P., St. Paul, MN, for appellant.
    Stanford P. Hill, Anne C. Towey, Kelly Putney, Bassford Remele,. P.A., Minneapolis, MN, for respondent.
    Considered and decided by HALBROOKS, Presiding Judge; LANSING, Judge; and MINGE, Judge.
   OPINION

MINGE, Judge.

The parties entered into a purchase agreement for the sale of residential property. Appellant buyer brought an action against respondent seller for specific performance and damages. Appellant challenges the district court’s judgment that relied on the unpled defense of abandonment and did not grant appellant’s claim for damages. Because the defense of abandonment was implicitly litigated by the parties and appellant does not show surprise or unfairness resulted from its consideration, we affirm the district court’s consideration of abandonment. Because the district court’s order appears to have only addressed abandonment with respect to the claim for specific performance, we reverse and remand for the district court to determine whether appellant abandoned the purchase agreement with respect to the claim for damages, and if not, what damages are due.

FACTS

Respondent Bradley J. Steiner owned rental property at 614 19th Ave N.E., Minneapolis (property) that is the subject of this dispute. In 1989, ■ appellant Judy L. Loppe began renting an apartment from respondent at a different location, and the parties became romantically involved. In 1996, appellant rented an-apartment at the disputed property.

Starting in 1996, -the parties executed several instruments transferring interests in the property between them. Initially, respondent gave appellant an unsigned quitclaim deed with an erroneous legal description. Several months later, respondent gave appellant a signed quitclaim deed with the correct legal description, and the parties executed a contract for deed for $52,500 with appellant as buyer and respondent as seller. After appellant failed to make required payments, respondent decided to end the contract, and in 1999, appellant quitclaimed her interest in the property back to respondent. Appellant states that she executed the quitclaim deed because respondent promised that he would refinance the property and then enter into a new contract for deed with her at a lower interest rate.

On April 10, 2001, the parties signed a purchase agreement for the property for a price of $84,500. According to respondent, he set that price based on the property’s market value for real estate tax purposes in 2001. The purchase agreement recited that appellant paid $1,000 in earnest money, but appellant testified that respondent told her that she did not have to pay the earnest money until the closing. Also according to the terms of the purchasé agreement, appellant agreed to pay $4,000 from her funds at the closing, with the balance of $79,500 being proceeds 'from a conventional mortgage. Appellant obtained a loan commitment from Wells Fargo Home Mortgage for $80,275. . Appellant received the abstract of title and arranged for title - examination, an appraisal, and homeowner’s insurance. Although the purchase agreement did not list a closing date, it appears that the closing was set for the end of May 2001. The purchase agreement contained a “time is of the essence” clause and a clause requiring that any action for specific performance be brought within six months after a breach.

Respondent testified that appellant called him a day or two before the closing and stated .that she wanted to only pay $52,500 for the property. Respondent did not appear at the closing and testified that “the deal was off as far as I was concerned.” It appears that appellant .was ready and willing to complete the purchase on the closing day.. After the closing did not occur, appellant purchased an extension of her mortgage financing to lock in her interest rate. Subsequently, appellant called respondent and asked him to close on the property. During this time, appellant continued to live in an apartment on the property and to pay monthly rent. In 2002, appellant withheld rent for about six months because she wanted' respondent to complete the closing. From 2000 to 2003, appéllant was listed as the owner for purposes of real estate taxes and the property was classified as her homestead. In June 2003, respondent notified the city assessor that he was the owner and the city billed respondent for back taxes based on fraudulent classification of the'property as appellant’s homestead.

On July 1, 2003, respondent initiated an unlawful detainer action to evict appellant from the property for nonpayment of rent. On July 14, 2003, appellant commenced an action claiming that respondent breached the purchase agreement and seeking specific performance or, in the alternative, damages. The parties alleged numerous claims and defenses against each other.

Pursuant to a stipulation, the district court consolidated the actions. Prior to trial, appellant moved to exclude certain affirmative defenses not set forth in respondent’s answer. The district court denied the motion and conducted a bench trial. At the time of trial, the property was appraised as having a fair market value of $200,000. On May 19, 2004, the district court entered judgment dismissing appellant’s claims with prejudice and ordering her to vacate the property. The district court’s original conclusions of law stated in relevant part, “[Appellant’s] subsequent demand that the price be reduced to $52,500.00 constituted a counter-offer by [appellant] that served as a rejection of the original purchase agreement. As a matter of law, the purchase agreement terminated at that point and [appellant] could no longer enforce the agreement.”

Appellant moved for a new trial or amended findings of fact and conclusions of law. Respondent opposed the motion and urged the district court to conclude that appellant had abandoned the contract by not seeking specific performance within six months. This was the first time that the term “abandonment” was used in the litigation. The district court denied appellant’s motion but amended its conclusions of law by deleting the previously quoted language and substituting the following:

[Appellant’s] attempt to reduce the contract price to $52,500 and her subsequent failure to initiate a specific performance action within the six (6) months specified by the black letter of the purchase agreement constitute an abandonment of the purchase agreement by [appellant]. [Appellant] has also failed to establish the reasonableness of her failure to exercise her rights pursuant to the black letter of the purchase agreement and, as such, has failed to prove up the elements of her claim for relief.

The district court’s attached memorandum also stated that respondent “concedes that [appellant] may be correct that her demand for a $52,500.00 actual purchase price did not constitute a rejection of the purchase agreement.”

Appellant filed this appeal challenging the district court’s dismissal of her claim for damages.

ISSUES

I. Is abandonment an affirmative defense?

II. Did the parties litigate abandonment by implied consent?

III. Did the district court err in not addressing appellant’s claim for damages?

IV. Did appellant so abandon the purchase agreement as to preclude a damages remedy?

ANALYSIS

I.

The first issue is whether respondent’s claim that appellant abandoned her interest in the purchase agreement is an affirmative defense that respondent was required to plead in his answer. Appellant claims that respondent waived the defense because he did not raise it in the pleadings. Minn. R. Civ. P. 8.03 specifies numerous defenses that must be pleaded affirmatively, including estoppel, laches, and waiver. The list is not exclusive and “any other matter constituting an avoidance” must also be pleaded affirmatively. Minn. R. Civ. P. 8.03.

The Minnesota Supreme Court’in Snyder v. City of Minneapolis, outlined criteria for determining whether a defense should be considered an affirmative defense. 441 N.W.2d 781, 788 (Minn.1989). In Snyder, the city lost a suit for damages after it unreasonably revoked a building permit. Id. at 783-84.. The court of appeals reduced the damage award pursuant to the statutory cap, and the plaintiff ap-» pealed, asserting that the limit on municipal liability is an affirmative defense. Id. at 785. The supreme court found that provisions of the Minnesota Rules of Civil Procedure dealing with affirmative defenses are identical with the federal rules and adopted criteria for identifying affirmative defenses set forth by Charles Wright and Arthur Miller in their commentary on the federal rules. Id. at 788. These criteria are surprise and fairness. Id; see 5 Charles A. Wright & Arthur R. Miller, Federal Practice & Procedure Civil § 1271 (3d ed.).

The Snyder court stated that surprise is a key factor because “had the defense ... been put forward when it could and should have been, it would have been open to plaintiff to pursue at that time such discovery procedures as he considered appropriate in order to develop the true state of facts.” Snyder, 441 N.W.2d at 788 (alteration in original) (quotation omitted). The Snyder court found that the plaintiff was not surprised by the statutory cap on damages‘because the cap was established in the Minnesota statutes. Id. The court also noted-that the statutory cap would not completely bar the claim, which is generally a requirement for finding that a matter is an affirmative defense. Id.

The Snyder court quoted the following from Wright & Miller to explain-why the fairness concept is key to requiring that an affirmative defense be specially pleaded: “[A]ll or most of the relevant information on a particular element of a claim is within the control of one party or that one party has a unique nexus with the issue'in question and therefore that party should bear the burden of affirmatively raising the matter.” Id. (quotation omitted). The court found that failure to plead a statutory cap was not unfair because pleading it would not have affected discovery of evidence or evidence introduced at trial. Id. Based on this analysis, the court concluded that the cap on municipal liability is not an affirmative defense. Id.

The criteria of surprise and fairness indicate that abandonment is an affirmative defense. Abandonment, unlike the statutory cap, requires a fact-specific inquiry and determination of the parties’ intentions. If the defendant plans to rely on this concept, the plaintiff should be aware of the claim. Moreover, abandonment is an avoidance defense similar to waiver and laches, which are enumerated affirmative defenses. Minn. R. Civ. P. 8.03.

Other states have found that abandonment is an affirmative defense. See, e.g., Wallace v. Grasso, 119 S.W.3d 567, 575 (Mo.Ct.App.E.D.2003) (finding that failure to plead the affirmative defense of aban donment resulted in waiver of the defense); Williams v. Williams, 25 Tenn. App. 290, 156 S.W.2d 363, 371 (1941) (finding that it was necessary to raise defense of abandonment in pleadings otherwise the defense is waived; San Jacinto Sand Co. v. Southwestern Bell Tel. Co., 426 S.W.2d 338, 344 (Tex.Civ.App.1968) (“There was no pleading of abandonment, which is an affirmative defense, and failure to plead it results in its waiver.”)). We conclude that abandonment is an affirmative defense.

II.

The second issue is whether the parties litigated abandonment by implied consent. Generally, a court will not consider an affirmative defense not raised in the pleadings. Minnesota-Iowa Television Co. v. Watonwan T.V. Improvement Ass’n, 294 N.W.2d 297, 305 (Minn.1980); Septran, Inc. v. Indep. Sch. Dist. No. 271, Bloomington, 555 N.W.2d 915, 919 (Minn. App.1996), review denied (Minn. Feb. 26, 1997). The rules of civil procedure permit a defendant to amend the pleadings to add an affirmative defense. Minn. R. Civ. P. 15.01; see also Federal Practice and Procedure § 1278.

If evidence relating to an unplead-ed affirmative defense is introduced without objection, the defense is deemed as properly litigated. Minn. R. Civ. P. 15.02; Clark v. Martinez, 295 F.3d 809, 815 (8th Cir.2002) (finding that because evidence of self-defense was introduced at trial without objection, self-defense was not waived). “However, if the record indicates that the unpleaded affirmative defense has not been tried by the ‘express or implied consent’ of the parties, the pleadings will not be treated as if they actually had raised the defense, and the district court may decide not to permit the issue to be litigated.” Federal Practice and Procedure § 1278; see also Leasing Assocs., Inc. v. Slaughter & Son, Inc., 450 F.2d 174, 176 (8th Cir.1971) (finding that affirmative defense of illegality was improper basis for reversal because it was not pleaded and record failed “to furnish sufficient basis to warrant a holding that the illegality defense was tried by implied consent”).

Here, respondent did not include abandonment as an affirmative defense in his pleadings and never made a motion to amend his pleadings to add a defense of abandonment. Appellant actually moved to exclude laches, statute of limitations, justification, and anticipating repudiation as affirmative defenses. The district court denied the motion. However, waiver and estoppel were raised by the respondent as affirmative defenses and are similar to abandonment. Appellant knew that the lapse of time was an issue in seeking specific performance and actively tried to show that the deadline for enforcing the contract was extended by extenuating circumstances of the case. Thus, facts relevant to the problem of delay were placed of record, and the issue was effectively litigated. Although abandonment is an affirmative defense, we conclude that it was tried by implied consent, and we reject appellant’s request for reversal on this ground.

III.

The third issue is whether the district court erred in not addressing appellant’s claim for damages. Consideration of this issue is complicated for two reasons: (1) respondent claims that appellant elected to pursue the remedy of specific performance and cannot now claim damages; and (2) it is unclear whether the district court’s finding of abandonment for purposes of specific performance applies to the damages claim.

A. Election of Remedies

Respondent claims that because appellant focused on the remedy of specific performance during trial, she is not entitled to pursue her alternative claim for damages. We note that respondent did not raise the election-of-remedies defense in the district court and that we generally do not consider legal theories for the first time on appeal. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn.1988). Additionally, courts have found that election of remedies is an affirmative defense that must be raised in the pleadings, and respondent did not raise this defense in his pleadings. See, e.g., Bharodia v. Pledger, 340 Ark. 547, 11 S.W.3d 540, 543 (2000) (“We have held that the doctrine of election of remedies is an affirmative defense and must be raised in an answer.”); Compass Bank v. MFP Fin. Servs., Inc., 152 S.W.3d 844, 852-53 (Tex.App.2005) (finding party precluded from asserting election of remedies as a defense because it is an affirmative defense that the party did not plead), pet. for review filed (Tex. June 9, 2005).

The merits of respondent’s election-of-remedies claim are also unpersuasive. As applied to contracts, the principle of election of remedies requires a plaintiff to choose whether to áffirna or disaffirm a contract. Blythe v. Kujawa, 177 Minn. 79, 82, 224 N.W. 464, 465 (1929).' But election of remedies does not require the plaintiff to choose a specific remedy to argue to the fact-finder. The Seventh Circuit has stated:’

[T]he election of remedies doctrine does not necessarily operate to force plaintiffs to elect a remedy, but to elect how they will proceed to recover for their injury. Forcing the plaintiff to elect the form of the proceedings is merely a requirement erected to prevent the defendant from being prejudiced. In a case involving specific performance and damages, this possible prejudice does not exist because both remedies depend upon an affir-mance of the contract.

Medcom Holding Co. v. Baxter Travenol Labs., Inc., 984 F.2d 223, 229 (7th Cir. 1993). Here, the record shows that appellant consistently argued in her complaint and throughout the case that she was entitled to monetary damages if the district court refused to grant specific performance. Damages is not a remedy that is raised for the first time on appeal. The district court acknowledged there is a claim for damages; appellant may assert this claim.

B. Lack of Damages Determination

Appellant asserts that the district court’s determination of abandonment is limited to the .remedy of specific performance and that it did not rule on damages. On this appeal, appellant recognizes that (1) the purchase agreement requires that , a claim for specific performance must be brought within six months; (2) she did not bring her claim for two years; and (3) the district court held that, at a minimum, she had abandoned her claim for specific performance. Appellant does not appeal the district court’s ruling on specific performance.

We agree that the district court’s findings of fact, conclusions of law, arid order focus on appellant’s delay of more than six months and abandonment as precluding the remedy of specific performance. Although the' district' court’s decision is broad enough to cover damages, at no point in the findings, conclusions or memorandum does the district court determine that abandonment applied to damages as opposed to specific performance. Because appellant clearly requested damages as an alternative remedy and presented evidence of damages, we conclude that the district court erred in not specifically ruling on appellant’s damages claim.

IV.

The last issue is whether appellant so abandoned the purchase agreement as to preclude her recovery of damages. Appellant argues that she did not abandon her rights under the purchase agreement for her damages claim. Because the language in the purchase agreement limits the time for seeking specific performance to six months, abandonment is more easily found for that remedy. Whether abandonment applies equally to a claim for damages is a different and more difficult determination.

Abandonment is the “voluntary relinquishment of an interest by the owner with the intent of terminating his ownership.” Melco Inv. Co. v. Gapp, 259 Minn. 82, 85, 105 N.W.2d 907, 909 (1960). “A finding of abandonment depends upon the intentions of the parties and is not predi cated on any single factor....” In re Application of Berman, 310 Minn. 446, 452, 247 N.W.2d 405, 408 (1976). A “party seeking to prove abandonment of a contract must present clear and convincing evidence of an intention by the other party to abandon its rights.” Republic Nat’l Life Ins. Co., v. Marquette Bank & Trust Co. of Rochester, 295 N.W.2d 89, 93 (Minn.1980). The intention to abandon a con tract may be found “from the facts and circumstances surrounding the transactions and may be implied from the acts of the parties.” Id. Abandonment “must be clearly expressed, and acts and conduct of the parties to be sufficient must be positive, unequivocal, and inconsistent with the existence of the contract.” Desnick v. Mast, 311 Minn. 356, 365, 249 N.W.2d 878, 884 (1976).

It does not appear that our courts have considered abandonment as it applies to purchase agreements. However, purchase agreements and contracts for deed are both contracts -for the conveyance of real estate. Minnesota statutes recognize this similarity by establishing a common procedure for canceling such contracts. See MinmStat. §§ 559.21-.217 (2004). Cases dealing with abandonment of contracts for deed are helpful in this purchase agreement area.

Abandonment is a defense in eon-tract-for-deed litigation because a party who abandons a contract for deed is not entitled to enforcement of the contract even if the vendor did not properly cancel the contract for deed, as required by Minn. Stat. § 559.21. See, e.g., Berman, 310 Minn, at 452, 247 N.W.2d at 408. The supreme court has outlined a number of factors in determining whether a contract for deed is abandoned, including: (1) failure to pay on the contract for long period of time; (2) failure to take or retain possession of the property; (3) failure to pay real estate taxes; and (4) awareness of the seller’s intent to terminate the contract-for-deed interest, coupled with failure to assert any right to the property. Id. Possession, in particular, is a significant factor. See, e.g., Tarpy v. Nowicki, 286 Minn. 257, 264, 175 N.W.2d 443, 448 (1970) (summarily dismissing defense of abandonment because plaintiff was in possession of property); Mulvihill v. Finseth, 396 N.W.2d 889, 893 (Minn.App.1986) (finding no genuine issue of material fact regarding abandonment because vendees possessed property by planting and partially harvesting corn crop), review denied (Minn. Jan. 27, 1987). However, a purchaser is entitled to possession under a contract for deed, but a purchase agreement does not usually include any rights of possession. Thus, this factor is not equally applicable to both situations.

Here, appellant took steps to proceed with the closing, checked title to the property, retained possession of the abstract of title, arranged for homeowner’s insurance, extended the interest rate commitment from her lender, requested a new closing date, remained on the premises — albéit as a tenant, and ultimately refused to pay rent to force resolution of the matter. During this entire time, the parties represented to Hennepin County that because of appellant’s occupancy of the property with a claim of ownership, the property was entitled to homestead treatment for purposes of property taxation: These facts are not consistent with abandonment. As' the district court observed, the rorhantic relationship between the parties may have lulled appellant into complacency.

In considering this matter, we note that because abandonment is. an uncertain basis for terminating the rights of a buyer under a purchase agreement, sellers typically either obtain a signed relinquishment of the buyer’s rights, obtain a quitclaim deed, or cancel the purchase agreement pursuant to Minn.Stat. §§ 559.21, .217. Respondent was not oblivious to such methods of clearing title.' Iii 1999, he had appellant quitclaim her interest to him to extinguish her rights under an earlier contract for deed.

As discussed earlier, the district court concluded that appellant abandoned her interest in the purchase agreement with reference to specific performance,, it did not clearly do so with reference to damages. Based on the record in this proceeding, we cannot conclude that as a matter of law there is clear and convincing evidence that appellant abandoned the purchase agreement for purposes' of a damages claim. We have only emphasized facts that contradict abandonment. We recognize that the record presents a mixed picture. For example, the district court found that appellant’s pre-closing date request to reduce the purchase price to $52,500 was evidence of abandonment. It is the role of the district court to make this determination.

We remand to the district court to determine whether appellant abandoned her interests in the purchase agreement under the clear and convincing evidence standard, and if the district court determines her interests were not abandoned, to determine what damages are due. Because a full bench trial has been conducted and a record exists, a new trial is not necessary. However, we do not limit the discretion of the district court to reopen the record or conduct such further proceedings as it deems appropriate for a fair determination of the, claims.

DECISION

Although abandonment is an affirmative defense and should be alleged in responsive pleadings, the parties addressed the factual basis for abandonment at trial and the district court’s consideration of the defense was not error. Appellant did not waive her claim for damages and the district court erred in not ruling on that claim. The case is remanded for a determination of abandonment with respect to the damages claim, and, if abandonment is not found, the amount of damages.

Affirmed in part, reversed in part, and remanded.

      . The district court found that the closing was scheduled for June 30, 2001. This finding appears to be erroneous, but neither party has ' challenged it, and this error appears to be harmless. See Minn. R. Civ. P. 61 (requiring harmless error to be ignored).

      . This issue was not addressed by district court and arose because respondent urged abandonment in a responsive post trial memorandum. The district court then modified its judgment to include abandonment. The underlying issue is a question of law, which we address de novo. See Modrow v. J.P. Foodservice, Inc., 656 N.W.2d 389, 393. (Minn.2003) (citing Frost-Benco Elec. Ass’n v. Minn. Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn. 1984)). -

      . The district court also commented that respondent concedes that that request did not constitute , a rejection of the purchase agreement. Given the finding about abandonment, this comment is ambiguous.


source: Caselaw Access Project

author: VANDE WALLE, Chief Justice.

license: Public Domain

text:
    2005 ND 120
    Michael BEAUDOIN, Plaintiff and Appellee v. SOUTH TEXAS BLOOD & TISSUE CENTER, Defendant and Appellant.
    No. 20040356.
    Supreme Court of North Dakota.
    June 24, 2005.

      Kay Nord Hunt (argued) and Robert J. King, Jr. (on brief), Lommen Nelson Law Firm, Minneapolis, MN, and Orell D. Schmitz (appeared), Schmitz & Schmidt, Bismarck, ND, for plaintiff and appellee.
    Michael T. Andrews (argued) and H. Patrick Weir (on brief), Vogel Law Firm, Bismarck, ND, for defendant and appellant.
   VANDE WALLE, Chief Justice.

[¶ 1] South Texas Blood & Tissue Center (“South Texas”) appealed a memorandum opinion and order denying its motions to dismiss for lack of personal jurisdiction and to vacate a default judgment.' We affirm the trial court’s denial of the motion to dismiss for lack of personal jurisdiction, but we reverse the trial court’s denial of the motion to vacate the default judgment and remand the case to the trial court.

[¶ 2] Michael Beaudoin had his right patella tendon surgically' replaced in Dickinson, North Dakota, with a tendon removed from a cadaver in Texas. At the request of a Connecticut corporation, Allo-graft.com, South Texas shipped the tendon to Dickinson. Beaudoin sued South Texas, alleging the tendon was not sterile, and that, as a result, he contracted an infection in his right knee. South Texas initially failed to respond to the suit, and the district court issued a default judgment for Beaudoin. A dispute regarding service of process arose, and we resolved that matter in Beaudoin v. South Texas Blood & Tissue Center, 2004 ND 49, 676 N.W.2dT03. Specifically, we held the professional process server’s delivery of the summons and complaint to South Texas’s Executive Office Manager, who had been identified as one authorized to accept such documents and appeared to be of sufficient character and rank to make it reásonably certain that South Texas would be apprised of the service, constituted valid service of process under N.D.R.Civ.P. 4(d). Id. at ¶ 18. After remand, the district court denied South Texas’s motion to dismiss the suit for lack of personal jurisdiction. The district court also denied South Texas’s motion to vacate the default judgment and to allow South Texas to respond to Beaudoin’s substantive allegations. The two questions raised in the present appeal are whether the district court has personal jurisdiction over South Texas and’whether the .district court erred in refusing to vacate the default judgment.

I.

[¶3] South Texas argues the district court does not have personal jurisdiction over it. South Texas asserts its constitutional, due-process rights would be violated by requiring it to defend against this suit in North Dakota. South Texas contends it does not have sufficient minimum contacts with the State and that, as a result, maintenance of this suit would be inconsistent with traditional notions of fair play and substantial justice.

A.

[¶ 4] South Texas highlights many facts militating against its amenability to suit in North Dakota. South Texas points out it has never maintained a place of business in North Dakota, it has never maintained offices in North Dakota, it has never stored inventory in North Dakota, it has never held bank accounts in North Dakota, it has never owned real estate in North Dakota, it has never kept personal property in North Dakota, it has never had employees in North Dakota, its employees do not travel to North Dakota, it has never acquired tissue within North Dakota, it has never processed tissue within North Dakota, it has never solicited business in North Dakota, it has never advertised in North Dakota, and it has never sent promotional materials to North Dakota.

[¶ 5] What South Texas does do, however, is to ship tissue components to places outside Texas. Prior to the shipment of Beaudoin’s order of two patella tendons on July 3, 2000, South Texas shipped patella tendons to both St. Joseph’s Hospital, the North Dakota hospital at which Beaudoin’s surgery occurred, and the Minot Air Force Base in North Dakota. St. Joseph’s Hospital placed orders on May 30, 2000, and June 19, 2000, and obtained five patella tendons. The Minot Air Force Base placed 19 orders from June 2, 1998, to June 12, 2000, and obtained 23 patella tendons. ■ South Texas continued to ship patella tendons to both of these entities after Beaudoin’s surgery.

[¶ 6] When South Texas sends components out of state, it does so with the assistance of third-party distributors. South Texas does not directly contract with, or sell blood and tissue components to, medical facilities, physicians, or patients. Rather, South Texas is contacted by distributors who field requests from medical facilities and physicians. The distributors proceed to act as intermediaries between the requesting party and South Texas. South Texas frequently ships its components directly to the end user for logistical and health reasons, and these .shipments are received by representatives of the distributing intermediaries. When preparing an order for packing and shipping, South Texas generates a Tissue Order form that contains South Texas’s contact information. South Texas further includes a Patient Usage Feedback Request form for tracking purposes, and this form also contains South Texas’s contact information.

[¶ 7] South Texas is entirely independent of the Connecticut-based intermediary at issue in this matter, Allograft.com. South Texas does not control Allo-graftcom’s distribution system. Further, South Texas was not aware the harvested tendon was to be sent to North Dakota until the day it received the shipment directive from Allograft.com. South Texas was not paid by St. Joseph’s Hospital, but by Allograft.com. South Texas had no'contractual relationship with St. Joseph’s Hospital, any. North Dakota physicians, or Beaudoin..

[¶ 8] South Texas believes its contacts with North Dakota were random and fortuitous . and the result of the unilateral activity of Allograft.com and St. Joseph’s Hospital.

B.

[¶ 9] In the recent case of Ensign v. Bank of Baker, 2004 ND 56, 676 N.W.2d 786, we discussed the requirements for personal jurisdiction:

Whether a court maintains personal jurisdiction over a party is a question of law, and we review the district court’s decision on the matter by employing the de novo standard, for legal conclusions and the clear-error standard for factual findings. Rodenburg [v. Fargo-Moorhead YMCA ], 2001 ND 139, ¶ 17, 632 N-W-2d 407. Once a defendant has challenged a court’s jurisdiction, the plaintiff bears the burden of proving that jurisdiction exists. Falkirk Mining Co. v. Japan Steel Works, Ltd., 906. F.2d 369, 373 (8th Cir.1990); Red River Transp. and Dev. Co., Inc. v. Custom Airmotive, Inc., 497 F.Supp. 425, 427 (D.N.D.1980). The plaintiff must make a prima facie showing of jurisdiction to defeat a motion to dismiss for lack of personal jurisdiction, and if the court relies only on pleadings and affidavits, the court must look at the facts in the light most favorable to the plaintiff. Rodenburg, at ¶ 17. Questions of personal jurisdiction must be decided on a case-by-case basis, depending on the particular facts and circumstances. Catlin v. Catlin, 494 N.W.2d 581, 590 (N.D.1992).
“A court has personal jurisdiction over a person if the person has reasonable notice that an action has been brought and sufficient connection with the forum state to make it fair to require defense of the action in the state.” [Larson v. Dunn, 474 N.W.2d 34, 38-39 (N.D. 1991) ]. In determining personal jurisdiction over a nonresident defendant, a court must first decide whether the forum state’s long-arm provision confers jurisdiction over the nonresident defendant, and, if it does, the court must decide whether the exercise of personal jurisdiction over the nonresident comports with due process. Rodenburg v. Fargo-Moorhead YMCA, 2001 ND 139, ¶ 15, 632 N.W.2d 407. To satisfy due process concerns, the nonresident defendant must have sufficient minimum contacts with North Dakota so the exercise of personal jurisdiction does not offend traditional notions of fair play and substantial justice. Hansen v. Scott, 2002 ND 101, ¶ 16, 645 N.W.2d 223.

Id. at ¶¶ 11, 9.

[¶ 10] North Dakota’s long-arm provision is N.D.R.Civ.P. 4(b), which provides:

(2) Personal Jurisdiction Based Upon Contacts. A court of this state may exercise personal jurisdiction over a person who acts directly or by an agent as to any claim for relief arising from the person’s having such contact with this state that the exercise of personal jurisdiction over the person does not offend against traditional notions of justice or fair play or the due process of law, under one or more of the following circumstances:
(A) transacting any business in this state;
(B) contracting to supply or supplying service, goods, or other things in this state;
(C) committing a tort within or without this state causing injury to another person or property within this state;
(D)committing a tort within this state, causing injury to another person or property -within or without this state;
(H) enjoying any other legal status or capacity within this state;
(3)Limitation on Jurisdiction Based Upon Contacts. If jurisdiction over a person is based solely upon paragraph (2) of this subdivision, only a claim for relief arising from bases enumerated therein may be asserted against that person.

North Dakota’s long-arm provision is “designed to permit the state courts to exercise personal jurisdiction to the fullest extent permitted by due process.” Hebron Brick Co. v. Robinson Brick & Tile Co., 234 N.W.2d 250, 255 (N.D.1975).

[¶ 11] As the Ensign Court continued:

We have identified five factors for assessing personal jurisdiction over a nonresident defendant: (1) the nature and quality of a nonresident defendant’s contacts with the forum state; (2) the quantity of the nonresident defendant’s contacts with the forum state; (3) the relation of the cause of action to the contacts; (4) the forum state’s interest in providing a forum for its residents; and (5) the convenience of the parties. Hansen, 2002 ND 101, ¶ 30, 645 N.W.2d 223; Lumber Mart, Inc. v. Haas Intern. Sales & Service, 269 N.W.2d 83, 88 (N.D.1978). While the first three factors are of primary concern, the fourth and fifth factors are of only secondary importance and are not determinative. Lumber Mart, Inc., at 88; see also Guinness Imp. Co. v. Mark VII Distrib., Inc., 153 F.3d 607, 614 (8th Cir. 1998). [The third factor draws a distinction as to whether the jurisdiction is specific or general. Burlington Indus., Inc. v. Maples Indus., Inc., 97 F.3d 1100, 1102-03 (8th Cir.1996).].

In Lakin v. Prudential Sec., 348 F.3d 704, 707 (8th Cir.2003), the Eighth Circuit .Court of Appeals explained:

The Supreme Court has noted that states exercise two broad types of personal jurisdiction: specific jurisdiction and- general jurisdiction. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 nn. 8-9, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). Specific jurisdiction refers to jurisdiction over causes of action that “arise out of’ or “relate to” a defendant’s activities within a state. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). General jurisdiction, “on the other hand, refers to the power of a state to adjudicate any cause of action involving a particular defendant/regardless of where the cause of action arose.” Sondergard [v. Miles, Inc., 985 F.2d 1389, 1392 (8th Cir.1993) ] (citation omitted); see also Helicopteros, 466 U.S. at 414.n. 9, 104 S.Ct. 1868, 80 L.Ed.2d 404,
General personal jurisdiction is proper only when the defendant has engaged in a high level of continuous and systematic contacts in the forum state. See Dalton v. R &W Marine, Inc., 897 F.2d 1359, 1362 (5th Cir.1990). Because of the broad basis for jurisdiction and the requirement of a ■ much higher level of contacts, the exercise of general personal jurisdiction “is typically limited to large companies doing a large amount of business on a regular basis.” Adams v. Riverview Healthcare Ass’n, No. A3-02-135, 2003 WL 1456442, [at *2,] 2003 U.S. Dist. LEXIS 4253, at * 5 (D.N.D. March 17, 2003). Most courts are hesitant to exercise general personal jurisdiction
over nonresident defendants. Lakin, 348 F.3d at 708.
A North Dakota court may' exercise specific personal jurisdiction over nonresident defendants only if they “ ‘purposefully directed their activities towards North Dakota,’ ” Rodenburg, 2001 ND 139,- ¶ 19, 632 N.W.2d 407 (quoting Falkirk Mining Co., 906 F.2d at 375), and the course of action “arise[s] out of’ or “relate[s] to” the defendant’s activities in the state. Lakin, 348 F.3d at 707.

Ensign, at ¶¶ 12-13,15.

[¶ 12] The mere likelihood or foreseeability that a product will find its way into a state is insufficient to ground personal jurisdiction. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980). Rather, the foreseeability that is critical is “that the defendant’s conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there.” Id. In seeking to define when a defendant should “reasonably anticipate” out-of-state litigation, the U.S. Supreme Court has relied on the language of Hanson v. Denckla:

The : unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State. The application of that rule will vary with the quality and nature of the defendant’s activity, but it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.

Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958) (discussed in Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474-75, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)). Further:

This “purposeful availment” requirement ensures that a defendant will not be haled into a jurisdiction solely as a result of “random,” “fortuitous,” or “attenuated” contacts, or of the “unilateral activity of another party or a third person.” Jurisdiction is proper, however, where the contacts proximately result from actions by the defendant himself that create a .“substantial connection” with the forum State. Thus where the defendant “deliberately” has engaged in significant activities within a State, or has created “continuing obligations” between himself and residents of the - forum, he manifestly has availed himself of the privilege of conducting business there, and because- his activities are shielded by “the benefits -and protections” of the forum’s laws it is presumptively not unreasonable to require him to submit to the burdens of litigation in that forum as well.

Burger King, 471 U.S. at 475-76, 105 S.Ct. 2174 (internal citations omitted) (emphasis in original).

C.

[¶ 13] Although the facts supporting the exercise of personal jurisdiction over South Texas are not overwhelming, they are nonetheless present. We initially note the complaint, which alleged both negligence and warranty claims, is sufficient to satisfy North Dakota’s long-arm provision. See N.D.R.Civ.P. 4(b)(2) (discussing claims involving torts and the supplying of goods and services in North Dakota). The more difficult question is of course whether the exercise of personal jurisdiction over South Texas comports with due process.

[¶ 14] South Texas’s contacts with North Dakota are neither sufficiently continuous nor-systematic to justify the exercise of general personal jurisdiction. See Lakin v. Prudential Sec., 348 F.3d 704, 707-08' (8th Cir.2003). Rather, the relevant questions are whether South Texas has sufficient minimum contacts with North Dakota, whether Beaudoin’s cause of action arises out of or is related to these contacts, and whether South Texas purposefully directed its activities toward the State.

[¶ 15] As a threshold matter, South Texas argues its “other” shipments of patella tendons to North Dakota cannot be invoked to establish specific personal jurisdiction in this case. We disagree. A plaintiffs cause of action must either “arise out of’ or “relate to” the defendant’s activities in the forum State. Here, South Texas shipped patella tendons, the tissue component used in Beaudoin’s surgery, to both St. Joseph’s Hospital and the Minot Air Force Base in the months and years preceding Beaudoin’s order. Although these other shipments were not the proximate cause of Beaudoin’s alleged injury, Beaudoin’s cause of action alleging a defect in his patella tendon does “arise out of’ the process through which South Texas’s components arrive in North Dakota. And, at the- very least, these orders are certainly “related to” a cause of action alleging a defect in one such tendon..

[¶ 16] By contrast, the case of Ensign v. Bank of Baker, 2004 ND 56, 676 N.W.2d 786, supports our view of South Texas’s other shipments of patella tendons to North Dakota. Although Ensign stands for the proposition that unrelated contacts cannot be invoked to establish specific personal jurisdiction, here the contacts are related. In Ensign, Ensign sued the Bank of Baker, a Montana bank, to determine priority between an agricultural supplier’s lien and the Bank’s security interest in a herd of livestock. Id. at ¶¶ 2-6. In response to the Bank’s objection to the North Dakota court’s exercise of personal jurisdiction, Ensign argued, in part, that personal jurisdiction was proper because the Bank made loans to North Dakota customers. Id. at ¶ 15. We noted Ensign was not a Bank customer and that the underlying debtors in the case were not North Dakota residents. Id. at ¶ 16. We concluded that Ensign’s action to determine lien priority and obtain a money judgment from the Bank was “totally unrelated to the loans made to other North Dakotans.” Id. The unique facts of Ensign do not stand for the proposition that a cause of action alleging a defect in a tissue component does not “arise out of’ or “relate to” recent activities undertaken by the defendant to supply the same tissue component to the forum State.

[¶ 17] Examining the quantity, nature, and quality of South Texas’s contacts with North Dakota, we are convinced that subjecting South Texas to the personal jurisdiction of the North Dakota courts is proper in this matter. While we refrain from overtly quantifying our analysis, we note South Texas has not merely shipped one or two components to North Dakota, although the U.S. Supreme Court has stated that “[s]o long as it creates a ‘substantial connection’ with the forum,' even a single act can support jurisdiction.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 n. 18, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). Rather,' South Texas shipped 28 patella tendons to North Dakota during the approximately two years preceding Beaudoin’s surgery. South Texas argues these North Dakota shipments, when compared to its shipments to other locales, are “infinitesimal” and “microscopic.” These mathematical .comparisons may be sound, but we do not believe they guide the law of personal jurisdiction. If such an analysis were adopted, states with smaller populations, such as North Dakota, would always be at a legal disadvantage compared to states with greater populations and larger economic markets. Simply because a State does not account for a proportionately high level of a company’s orders or revenues does not foreclose a finding that the company has sufficient minimum contacts with the forum State to ground personal jurisdiction.

[¶ 18] Regarding the nature and quality of these activities, South Texas argues its contacts with North Dakota have been random, fortuitous, and the result of the unilateral activity of third parties, here Allograft.com and St. Joseph’s Hospital. This argument has some initial appeal, but it fails closer scrutiny. ■ South Texas essentially argues it should be shielded from personal jurisdiction in North Dakota because its various distributors arrange the terms and conditions of the sales made to hospitals, physicians, and end users. This argument fails to address a central fact we view to be dispositive: South Texas does not blindly ship tissue components to its autonomous distributors with no awareness or expectation of where these components will ultimately come to rest; rather, South Texas typically maintains physical control of its components until they are directly shipped to the patient’s location, as was the case here.

[¶ 19] South Texas asserts it maintains physical control over its components merely for health and logistical reasons. South Texas points out it does not know where these components are destined to be sent until immediately prior to shipment. These statements may be true, but the autonomy South Texas heralds between itself and its distributors is a double-edged sword. Even though the distributors may act independently in developing potential business transactions, South Texas is not bound to ratify the actions of its distributors. Instead, because South Texas fails to relinquish physical control over its products until final shipment, the company, regardless of the reasons for maintaining such control, reserves the ultimate freedom to assume or reject any proposal from its independent distributors. When a proposal from a distributor is presented to South Texas, the company, who at that point is aware of the end-user’s location, makes a conscious decision whether it wants to complete the transaction and serve the end-user’s market. In World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980), the Supreme Court explained why it is just to ground personal jurisdiction in these types of situations:

When a corporation purposefully avails itself of the privilege of conducting activities within the forum State, it has clear notice that it is subject to suit there, and can act to alleviate the risk of burdensome litigation by procuring insurance, passing the expected costs on to customers, or, if the risks are too great, severing its connection with the State. Hence if the sale of a product of a manufacturer or distributor ... is not simply an isolated occurrence, but arises from the efforts of the manufacturer or distributor to serve, directly or indirectly, the market for its product in other States, it is not unreasonable to subject it to suit in one of those States if its allegedly defective merchandise has there been the source of injury to its owner or to others.

Id. at 297-98, 100 S.Ct. 559 (internal quotations and citations omitted).

[¶ 20] Having made the choice to serve the North Dakota medical market 21 times, resulting in the shipment of 28 patella tendons during the two years preceding Beaudoin’s surgery, we conclude South Texas has purposefully directed its activities toward North Dakota. Accordingly, we believe it erroneous for South Texas to claim its products arrived in North Dakota via random or fortuitous events or the unilateral activity of others. A North Dakota lawsuit arising out of or, at the very least, relating to these shipments of patella tendons does not offend traditional notions of fair play and substantial justice. And, given South Texas’s deliberate conduct and connection with North Dakota, the company should reasonably anticipate being haled into a .North Dakota court to defend against an alleged defect in one of its products.

[¶ 21] We also note that, in making the decision to serve an end user, South Texas is aware that its Tissue Order form and Patient Usage Feedback Request form will be included with its shipped order. Both of these forms contain South Texas’s contact information. The Patient Usage Feedback Request form places a minimal reporting burden on the end user, physician, or hospital in the forum State and, far more significantly, raises the specter of a continuing relationship between South Texas and the forum State in the event questions or medical complications develop. Cf. Travelers Health Ass’n v. Virginia, 339 U.S. 643, 647, 70 S.Ct. 927, 94 L.Ed. 1154 (1950) (noting, in the context of an interstate contractual obligation, that parties who “reach out beyond one state and create continuing relationships and obligations with citizens of another state” can be subject to “the jurisdiction of regulatory agencies in the latter state”). That this form is an “industry requirement” does not lessen the potential relationship. Although not critical to our resolution of this case, these forms nonetheless demonstrate that South Texas held itself out to the end users of its products, and, when viewed in light of the arguments discussed above, support the conclusion that South Texas has sufficient minimum ' contacts = with North Dakota and purposefully directed its activities toward the State.

[¶ 22]- Cases from other jurisdictions cited in support of South Texas’s arguments are distinguishable. In State ex rel. Wichita Falls General Hospital v. Adolf, 728 S.W.2d 604 (Mo.Ct.App.1987), a Texas hospital notified an information clearinghouse as to the availability of a heart suitable for transplant. Id. at 605-06. The clearinghouse then notified a Missouri hospital and doctor regarding the availability of the heart. Id. at' 606. The Missouri doctor contacted the Texas hospital, which served to notify the Texas hospital that the ultimate destination of the heart would be Missouri. Id. The Missouri doctor traveled to Texas with a transplant team -and proceeded to harvest the organ. Id. Complications with the heart transplant ensued, and the family of the Missouri heart-transplant patient sued the Texas hospital in Missouri’s court system. Id. The Texas hospital moved to dismiss the suit for lack of personal jurisdiction, and the appellate court ultimately granted the Texas hospital relief. Id. at 606, 609.

[¶ 23] Admittedly, there are many facts that unite our case and Wichita Falls. The Texas hospital initiated no contact with Missouri. Id. at 609. Rather, the initial contact was between the clearinghouse and the Missouri hospital and doctor. Id. And, before the harvesting occurred, the Texas hospital learned the heart would be.destined for Missouri. Id. at 606. Similarly, South Texas did not, in the first instance, initiate contact with North Dakota. Rather, initial contact was between Allograft.com and North Dakota. Further, before shipping the patella tendon, South Texas learned that the order was destined for North Dakota.

[¶ 24] Despite these factual similarities, we believe the tenor of these two cases is unique. The Texas hospital in Wichita Falls was not in the business of soliciting donor organs for distribution. Id. at 609. Rather, fueled by humanitarian concerns, the Texas hospital would contact a clearinghouse if a donor organ happened to become available. Id. at 606. Here, South Texas is primarily in the business of acquiring and supplying blood and tissue products. Even though South Texas is a 501(c)(3), non-profit organization, presumably it must by necessity make enough return on its activities to meet its actual operating costs. The harvesting, preparation, and shipment, which included South Texas’s contact information, were completed as a part of South Texas’s regular course of business. These activities are all hallmarks of a commercial actor purposefully directing its services and products to a forum State. In Wichita Falls, however, the Texas hospital’s actions were not deemed..a commercial activity because it failed to recoup its actual costs in the heart transaction, and in fact sustained an overall financial loss as a result of its involvement in the organ-donor program. Id. at 609.

[¶ 25] Also, the record demonstrated no history of contact between the Texas hospital and Missouri in Wichita Falls. Id. at 609. In our case, as we have noted, there is a detailed history of related contacts between South Texas and North Dakota.

[¶ 26] In Wichita Falls, although the Missouri hospital and doctor did work through the clearinghouse initially, it was the Missouri doctor who initiated contact with the Texas hospital and who, significantly, flew to Texas to personally harvest the organ. Id. at 606. The Texas hospital can thus be seen as a relatively passive actor/ In our case, however, despite both South Texas and Beaudoin relying on Allo-graft.com to help initially structure and facilitate the transaction, it was South Texas- that chose to consummate the deal by shipping the patella tendon to North Dakota, an affirmative, active, and direct contact with the State.

[¶ 27] The similarities between Wichita Falls and the present case notwithstanding, we believe these iinportant differences reinforce why questions of personal jurisdiction must be decided on a case-by-case basis, depending on the particular facts and circumstances presented. Catlin v. Catlin, 494 N.W.2d 581, 590 (N.D.1992).

[¶ 28] Many of the other cases cited by South Texas revolve around the stream-of-commerce theory of personal jurisdiction. The stream-of-commerce theory is often traced to Justice White’s statement that “[t]he forum State does not exceed its powers under the Due Process Clause if it asserts personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State.” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297-98, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980); see also Gray v. American Radiator & Standard Sanitary Corp., 22 Ill.2d 432, 176 N.E.2d 761, 766 (1961) (noting that although a manufacturer working through intermediaries derives only an indirect benefit from a forum-State’s laws, this indirect benefit is nonetheless essential to the manufacturer’s business and can ground personal jurisdiction). On its face, this statement would cut against South Texas’s claims. Even if South Texas “delivered” its products into the stream of commerce through its distributors, South Texas cannot argue it did not “expect” its products would be purchased by North Dakota consumers because South Texas had actual knowledge its products were headed to North Dakota before any shipments were made.

[¶ 29] Rather, South Texas appears to rely on the subsequent Supreme Court decision of Asahi Metal Industry Co. v. Superior Court of California, 480 U.S. 102, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987), to support its contention. In Asahi, four members of the Supreme Court held that, in addition to merely placing a product in the stream of commerce with the expectation it will be purchased by consumers in the forum State, there must also be a finding the defendant purposefully directed its activities toward the forum State in order to establish personal jurisdiction. Id. at 112, 107 S.Ct. 1026. Assuming this additional requirement is good law, we have already decided that South Texas purposefully directed its activities toward North Dakota when it made the conscious decision to serve the North Dakota market for patella tendons. Therefore, any argument South Texas advances based on cases utilizing a heightened stream-of-commerce theory must fail.

II.

[¶ 30] South Texas argues the district court erred in refusing to vacate the default judgment under N.D.R.CÍV.P. 60(b)(i), which would have allowed South Texas to respond to Beaudoin’s complaint. South Texas notes N.D.R.Civ.P. 60(b)(i) is to be liberally construed and applied, decisions on the merits are preferable to those by default, and that it sought timely relief from the default judgment, and-interposed meritorious defenses. South Texas also argues its initial failure to appear and defend was due to an inadvertent mistake, namely a misplacement of the summons and complaint.

A.

[¶ 31] As we previously described in Beaudoin v. South Texas Blood & Tissue Center, 2004 ND 49, ¶ 3, 676 N.W.2d 103, a professional process-server served Beau-doin’s summons and complaint on South Texas at its headquarters in San Antonio, Texas, on August 19, 2002. South Texas’s Executive Office Manager, Betty Nickerson, accepted the documents. Nickerson then submitted the papers to Norman D. Kalmin, M.D., South Texas’s President/CEO and Medical Director. Kalmin turned the summons-and complaint over to Mary Beth Fisk, Vice President of Tissue Services. Fisk sent a copy of the papers to Donna Respondek, Vice President, of Financial Services, requesting that Res-pondek file a claim with their insurance company. Respondek was on vacation at the time, and the copy of the summons and complaint was accidentally misfiled in the Financial Services Department. The company took no further action. This went undiscovered until January 8, 2003, when a call was received from Beaudoin’s attorney informing South Texas of the default judgment. •

B.

[¶ 32] Rule 60, N.D.R.Civ.P., provides, in part:

(b) Mistakes-Inadvertence-Excusable Neglect-Newly ■ Discovered Evidence-Fraud-Etc. On motion and upon such terms as are just, the court may relieve a party or a party’s legal representative from a final judgment or order in any action or proceeding for the following reasons: (i) mistake, inadvertence, surprise, or excusable neglect; ... or (vi) any other reason justifying relief from the operation of the judgment.

[¶ 33] This Court has stated the following regarding N.D.R.Civ.P. 60:

' A motion to vacate a judgment under N.D.R.Civ.P. 60(b)(i) lies within the sound discretion of the trial court, and its decision will not be disturbed on appeal unless the court has abused its discretion. An- abuse of discretion by the trial -court is never assumed; - the burden is on the party seeking relief to affirmatively establish it. The trial court abuses its discretion only when it acts in an arbitrary, unreasonable, or unconscionable manner. A trial court hcts in an arbitrary, unreasonable, or unconscionable manner when its decision is not the product of a rational mental process by which the facts'and law relied upon are stated and considered together for the purpose of achieving- a reasoned and reasonable determination. We will not overturn the trial court’s decision merely because it is not the one we may have madé if we were deciding the motion.
This Court has emphasized that N.D.R.Civ.P. 60(b) is to be liberally construed and applied, and trial courts should be more lenient in granting motions to vacate default judgments than in vacating judgments in cases which have been tried on their merits. The relevant factors were summarized, in CUNA Mortgage v. Aafedt, 459 N.W.2d 801, 803 (N.D.1990) (citations omitted):
This court .has long encouraged trial courts to be more lenient when entertaining Rule 60(b) motions to vacate default judgments as distinguished from “litigated” judgments, that is, judgments entered after trial on the merits. While a trial court certainly has discretion to grant or deny a Rule 60(b) motion to vacate a default judgment, the range of that discretion is limited by three important considerations. First, Rule 60(b) is remedial in nature and should be liberally construed and applied. Second, decisions on the merits are preferable to those by default. Third, as a consequence of the first two considerations, where timely relief is sought from a default judgment and the movant has a meritorious defense, doubt, if any, should be resolved in favor of the motion to set aside the judgment so that cases may be decided on their merits.

Gepner v. Fujicolor Processing, Inc., 2001 ND 207, ¶¶ 13-14, 637 N.W.2d 681 (internal citations and quotations omitted); see also Suburban Sales & Serv., Inc. v. District Court of Ramsey County, 290 N.W.2d 247, 252 (N.D.1980) (noting that no cases were discovered in which our trial courts were held to have abused their discretion in vacating a judgment, but citing several occasions in which our trial courts abused their discretion in refusing to vacate a judgment under Rule 60(b)).

C.

[¶ 34] In its opinion, the district court stated the following reasons for denying South Texas’s motion to vacate the default judgment:

In the instant case, there is no question that the Defendant is equipped with a meritorious defense, and it is uncontested that they reacted to the default judgment as soon as was possible. Based upon [language similar to that included in Section B above], it would seem that vacating the judgment is the only option. However, our inquiry does not end there.
Although the Defendant has cited copious amounts of state and federal case law to support his contention that the corporation’s misplacement of the summons and complaint constitutes excusable neglect and mistake, the Plaintiff has maintained throughout the action, that because the mistake and neglect was the Defendant’s own, the Defendant should not be relieved from the default judgment. The Plaintiffs argument is very persuasive. A quick perusal of prior North Dakota decisions proves that in addition to the factors outlined above, the Court must also take into account who was responsible for the alleged mistake or neglect giving rise to the default.
In CUNA [Mortgage v. Aafedt, 459 N.W.2d 801, 803 (N.D.1990) ], the Court vacated the default judgment, but in doing so stated that “CUNA’s failure to timely respond was the result of lawyer error, which we are reluctant to attribute to a client who has not been personally negligent.” Id. It is evident, under the caveat expressed by the Supreme Court in CUNA (that negligence was not attributed to client) that neglect by the client himself would have been treated differently than the then-present neglect by legal representation.
Likewise, in King v. Montz, the Court again qualified its decision to vacate default judgment by saying, “that the defendant personally was not negligent in the protection of her interests seems clear from the facts recited. In situations such as are here disclosed, the courts have been reluctant to attribute to the parties the errors of their legal representatives.” 219 N.W.2d 836, 839-840 (N.D.1974).
Indeed, many of the cases the Defendant cites to support vacating the default judgment, also include language similar to that described in both Montz and CUNA. [See Gepner v. Fujicolor Processing, Inc., 2001 ND 207, 637 N.W.2d 681] (‘We have also cautioned that,, when the inadvertence or neglect has been committed by a party’s attorney or insurer, we are reluctant to- attribute the error to a client who was not personally responsible.”); First Fed. Sav. [&] Loan Ass’n v. Hulm, 328 N.W.2d 837 (N.D.1982) (“In this case there is no assertion by Linda that her failure to make an appearance in the case prior to entry of the default judgment was the result of the neglect or other act of any third party.”).
The treatment received under N.D.R.Civ.P. 60(b) depends not simply upon the timeliness of motion or merit of the defense, it also -depends upon [whose] mistake or neglect leads to the subsequent default judgment. In the case at hand, the Defendant was fully capable of providing a response. Its failure to do so arose from its own negligence as to the filing of the documents. This Court finds that because the incidents leading to the default judgment are those for which the Defendant is personally responsible, the default judgment shall remain closed and final.
Similarly, the language of N.D.R.Civ.P. 60(b)(vi) is not persuasive. The Court, ip In re Braun stated:
“This broad language gives the courts ample power to vacate judgments whenever such action is appropriate to accomplish -justice. Of course, this power is not provided in order to relieve a party from free, calculated and deliberate choices he has made. The party remains under a duty to-take legal steps to protect his interests. But,if it is unjust that a ■judgment be enforced, Rule 60(b)(6), supra,'provides an avenue for escape -from the judgment!”] 145 N.W.2d 482 (N.D.1966).
This Court finds again, because the Defendant was solely responsible for the negligence leading to default, -it would be unwise to vacate the default decision. The Defendant’s haphazard actions constitute “free, calculated- and deliberate choices!,”] and therefore his motion to vacate the default judgment is, in all parts, denied.

[¶ 35] South Texas contends the district court misinterpreted N.D.R.Civ.P. 60(b)(i) when the district court undertook an analysis of who was responsible for the alleged mistake or neglect giving rise to the default and ultimately denied relief because it placed blame at the feet of South Texas. South Texas argues neither the rule nor our case law requires the mistake, inadvertence, surprise, or excusable neglect be that of a third party. We agree.

[¶ 36] Although the district court is correct in noting we are reluctant to attribute a third-party’s errors to an innocent defendant, this fact does not foreclose N.D.R.Civ.P. 60(b)(i) relief when a defendant has personally .erred.. Beaudoin attempts to explain the district court’s statements by arguing that the court did not engraft a requirement that the mistake, inadvertence, surprise, or excusable neglect be that of a third party, but simply “analyze[d] the excusable neglect requirement, in part, by considering cases where a [third party] committed the mistake or excusable neglect.” We do not interpret the district court’s statements in this light. The district court does arrive at the conclusion that South Texas’s actions were the result of “free, calculated and' deliberate choices,” and such a statement could presumably -reveal the district court’s belief that South Texas’s actions were not, from a factual standpoint, the result of mistake or excusable neglect. However, it is equally possible the district court simply re-referenced this language to dispose of South Texas’s ' argument under N.D.R.Civ.P. 60(b)(vi).

[¶37] Even if we assume the former explanation, this isolated sentence must be viewed in the context of the numerous pages of legal analysis from the district court indicating that a defendant’s own errors are seemingly never an adequate basis for relief from a default judgment under N.D.R.Civ.P. 60(b). Our case law, which has frequently permitted relief from errors assignable to a defendant, does not support this conclusion. See, e.g., U.S. Bank Nat’l Ass’n v. Arnold, 2001 ND 130, ¶¶ 25-28, 631 N.W.2d 150 (denying the defendant Rule 60(b) relief, but discussing situations in which a defendant’s depression and medical condition can lead to relief from a default judgment); Red River State Bank v. Reierson, 533 N.W.2d 683, 688-89 (N.D.1995) (finding of excusable neglect affirmed where party did not contact new, in-state counsel until shortly after the time for amending the judgment had expired); Suburban Sales & Serv., Inc. v. District Court of Ramsey County, 290 N.W.2d 247, 253-54 (N.D.1980) (Rule 60(b) relief partially based on defendant’s mental depression stemming from automobile accident); Sioux Falls Constr. Co. v. Dakota Flooring, 109 N.W.2d 244 (N.D.1961) (defendant’s inattention to suit due to wife’s illness found to be excusable neglect); see also N.D.R.Civ.P. 60(b) (authorizing a district court to relieve “a party or a party’s legal representative” from a final judgment or order); cf. Wilj Int’l Ltd. v. BioChem ImmunoSystems, Inc., 4 F.Supp.2d 1, 7 (D.Mass.1998) (discussing identical language from the Federal Rules of Civil Procedure and concluding that “Fed.R.Civ.P. 60(b)(1) gives a court discretion, in the interest of justice, to relieve a party from the consequences of its own ‘mistake, inadvertence, surprise, or excusable neglect.’ ”).

[¶ 38] Further, the district court failed to engage in a detailed, fact-based discussion to support a conclusion that South Texas’s actions were not the result of mistake or excusable neglect. Cf. U.S. Bank Nat’l Ass’n v. Arnold, 2001 ND 130, ¶ 25, 631 N.W.2d 150 (district court failed to find excusable neglect after detailed examination and scrutiny of factual assertions njade in defendant’s affidavit). Rather, the district court seemed to base its conclusions on a narrow rather than a liberal reading of the requirements of N.D.R.Civ.P. 60(b)(i), if not an erroneous reading of these requirements. Therefore, the district court’s conclusion, which is based on a belief that Rule 60(b)(i) relief is only appropriate when the error is attributable to a third party, misinterprets and misapplies our law and, accordingly, is an abuse of discretion. See, e.g., Filler v. Bragg, 1997 ND 24, ¶ 9, 559 N.W.2d 225 (stating that a misinterpretation or misapplication of the law constitutes an abuse of discretion).

[¶ 39] Rule 60(b) is remedial in nature and should be liberally construed and applied. Decisions on the merits are preferable to those by default. Further, the trial court itself noted “there is no question that the Defendant is equipped with a meritorious defense, and it is uncontested that they reacted to the default judgment as soon as was possible.” Given these factors, the trial court’s decision to deny South Texas’s motion to vacate the default judgment based largely, if not exclusively, on a misinterpretation and misapplication of N.D.R.Civ.P. 60(b)®, must be reversed as an abuse of the trial court’s discretion.

[¶ 40] A defendant’s own errors will not always constitute proper grounds for relief from a default judgment. The applicable standard under N.D.R.Civ.P. 60(b)(i) remains “mistake, inadvertence, surprise, or excusable neglect.” Nonetheless, where a trial court’s application of this standard is guided by a misinterpretation and misapplication of our law, rather than a rigorous analysis of the facts, reversal of the trial court is the proper remedy.

[¶ 41] We affirm the trial court’s denial of the motion to dismiss for lack of personal jurisdiction, but we reverse the trial court’s denial of the motion to vacate the default judgment and remand the case to the trial court.

[¶42] DALE V. SANDSTROM, MARY MUEHLEN MARING, JJ., and WILLIAM F. HODNY, S.J., concur.

[¶ 43] The Honorable WILLIAM F. HODNY, S.J., sitting in place of KAPSNER, J., disqualified.

      . In Jennings v. AC Hydraulic A/S, 383 F.3d 546, 550 n. 2 (7th Cir.2004), the Circuit Court of Appeals noted the Supreme Court's decision in Asahi "left open the question whether a plaintiff making a stream-of-commerce argument needs to make an additional showing that the defendant purposefully directed its business activities toward the forum state.” Asahi's two concurring' opinions, which reflected the views of five Justices, either explicitly rejected the additional requirement of purposeful direction or stated that the issue should not háve been reached.


author: KONENKAMP, Justice. ZINTER, Justice

text:
    2005 SD 75
    Matthew L. SCHULTE, Plaintiff and Appellant, v. PROGRESSIVE NORTHERN INSURANCE COMPANY and Thomas Hoftiezer, Defendants and Appellees.
    No. 23365.
    Supreme Court of South Dakota.
    Considered on Briefs March 21, 2005.
    Decided June 15, 2005.
    Stephen C. Landon, Shawn M. Nichols of Cadwell, Sanford, Deibert & Garry; Sioux Falls, South Dakota, Attorneys for plaintiff and appellant.
    Patricia A. Meyers of Costello, Porter, Hill, Heisterkamp, Bushnell <& Carpenter, Rapid City, South Dakota, Attorneys for defendants and appellees.
   KONENKAMP, Justice.

[¶ 1.] In this declaratory action dealing with insurance coverage, the plaintiff seeks to recover the policy limits of $100,000 from both the offending driver, for negligent operation of the insured vehicle, and the driver’s father, for negligent entrustment. We conclude that under, our automobile insurance statutes the policy limits apply to the insured vehicle and do not require separate policy limits for each insured who may be liable in a single accident. We affirm the circuit court.

Background

[¶ 2.] Plaintiff Matthew L. Schulte was seriously injured in an automobile accident in Clay County, South Dakota, on March 24, 2003. The accident occurred when Joshua Hoftiezer drove a truck through the on-coming lane of traffic without yielding the right-of-way and collided with Schulte, who was traveling in the opposite direction. The truck Joshua was operating was owned, licensed, and insured by his father, Thomas Hoftiezer. As the named insured, Thomas Hoftiezer held an “owners policy” issued by Progressive Northern Insurance Company. See SDCL 32-35-68 (1960). Under this policy, Hof-tiezer’s son, Joshua, was an additional insured. The policy had liability limits of $100,000 per person and $300,000 per accident.

[¶ 3.] At the time of the accident, Joshua was driving with a suspended license, had previously been cited for driving under the influence and failing to stop, and was reputed to be a poor driver. Despite his alleged knowledge of Joshua’s poor driving record, Thomas Hoftiezer provided the insured vehicle for his son’s use.

[¶ 4.] Progressive offered Schulte $100,000 in exchange for a full and final release of any claims against Progressive, Hoftiezer, and Joshua. Although Schulte’s damages exceed $100,000, the company maintained that $100,000 was the limit in total liability coverage available to Schulte under Hoftiezer’s policy. Schulte brought a declaratory action against Progressive, seeking a determination that Hoftiezer’s policy provided separate policy limits for both insureds, Thomas and Joshua Hof-tiezer. Each side moved for summary judgment. In granting Progressive’s motion, the circuit court concluded that Progressive was under no obligation to pay its policy’s liability limits for Hoftiezer’s negligent entrustment of the automobile and also pay its policy limits for Joshua’s negligent driving. On appeal, Schulte contends that Progressive is required to provide separate policy limits of $100,000 for the independent acts of negligence of each of its insureds.

Standard of Review

[¶ 5.] Under our familiar standard of review in summary judgment cases, we decide only whether genuine issues of material fact exist and whether the law was correctly applied. If any legal basis exists to support the trial court’s ruling, we will affirm. Kobbeman v. Oleson, 1998 SD 20, ¶ 4, 574 N.W.2d 633, 635 (citing SDCL 15-6-56(c) (1966)); see De Smet Ins. Co. of South Dakota v. Gibson, 1996 SD 102, ¶ 5, 552 N.W.2d 98, 99. “With the material facts undisputed, our review is limited to determining whether the trial court correctly applied the law.” Kobbeman, 1998 SD 20, ¶ 4, 574 N.W.2d at 635. Statutory construction and insurance contract interpretation are questions of law reviewable de novo. Auto-Owners Ins. Co. v. Hansen Housing, Inc., 2000 SD 13, ¶ 10, 604 N.W.2d 504, 509 (citations omitted).

Analysis and Decision

[¶ 6.] Schulte argues that Joshua’s negligent driving and his father’s negligent entrustment are two active and distinct acts of negligence; therefore, Progressive should be obliged to provide the policy limits of $100,000 for each negligent act. Progressive does not dispute that Schulte’s injuries exceed $100,000, but contends that $100,000 is the limit payable for Schulte’s damages. Schulte maintains that the circuit court erred in ruling that the limits of automobile liability coverage did riot apply separately to Joshua, as an insured permissive user, and to Hoftiezer, as the named insured under the policy.

[¶ 7.] South Dakota’s financial responsibility law requires that automobile insurance policies provide vehicle owners with certain liability coverage for acts aris-' ing out of the ownership of insured vehicles. SDCL 32-35-70 (1992); Colonial Ins. Co. of Cal. v. Lundquist, 539 N.W.2d 871, 875 (S.D.1995). Because coverage is mandatory, our state’s omnibus clause must be read into every “automobile insurance policy whether or not coverage is explicitly included by the policy language.” 8 Lee R. Russ & Thomas F. Segalla, Couch on INSURANCE § 111:23 (3d ed. 2004). Schulte does not contend that Progressive’s policy provides coverage greater than that required under South Dakota law. His argument is that our financial responsibility laws require that the coverage he contends exists must be read into the policy. Thus our analysis centers on SDCL 32-35-70:

An owner’s policy of liability insurance referred to in § 32-35-68 shall insure the person named therein and any other person as insured, using any insured vehicle or vehicles with the express or implied permission of the named insured, against loss from the liability imposed by law for damages arising out of the ownership, maintenance, or use of the vehicle or vehicles within the United States of America or the Dominion of Canada, Subject to limits ■ exclusive of interests arid costs, with respect to each insured vehicle, as follows: twenty-five thousand dollars because of bodily injury to or death of one person in any one accident and, subject to the’ limit for one person, fifty thousand dollars because of bodily injury to or death of two or moré persons iri any one accident, and twenty-five thousand dollars because of injury to or destruction of property of others in any one accident....

Id. (emphasis added),

[¶ 8.] Under the unambiguous terms of this statute, we cannot sustain plaintiffs interpretation. This statute sets a per person limit for each “accident” involving the named or permittee insured using an insured vehicle. The operative language requires liability insurance “for damages arising out of the ownership, maintenance, or use of the vehicle or vehicles ..., subject to limits ... with respect to each insured vehicle .... Id. (emphasis added). It is clear that the limits apply to each insured vehicle. In fact, under SDCL 82-35-69 “[a]n owner’s policy of liability insurance referred to in § 32-35-68 shall designate by explicit description or by appropriate reference all vehicles with respect to which coverage is thereby to be granted.” Id. (1960).

[¶ 9.] Each vehicle in South Dakota must be covered by the obligatory liability limits in the event the owner or other person named in the policy uses the vehicle and causes personal injury or property damage. Nothing in these statutes suggests that the Legislature intended that the limits of liability should multiply depending on the number of negligent acts by insureds legally liable for causing a single accident. Accordingly, we find no support in our laws to require an insurer to pay policy limits for the permissive vehicle user for negligently causing an accident and the insured owner for negligently entrusting the vehicle, so that one injured party in a single accident may recover the policy limits from each.

[¶ 10.] Affirmed.

[¶ 11.] GILBERTSON, Chief Justice, and SABERS and MEIERHENRY, Justices, concur.

[¶ 12.] ZINTER, Justice, concurs with a writing.

ZINTER, Justice

(concurring).

[¶ 13.] I concur and write to address Schulte’s argument that declining to require the payment of two liability limits deprives the insureds of coverage in violation of South Dakota’s public policy.

[¶ 14.] Schulte is correct that a vehicle operator is required to be insured to the same extent as the owner. “The operation of an omnibus clause creates Lability insurance in favor of persons other than the named insured to the same degree as the insured.” Estate of Trobaugh ex rel Trobaugh v. Farmers Ins. Exch., 2001 SD 37, ¶ 21, 623 N.W.2d 497, 502. This Court has also specifically held that a policy must cover the operator and one who negligently entrusts the vehicle to another. See Colonial Ins. Co. of Cal. v. Lundquist, 539 N.W.2d 871 (S.D.1995). Schulte hypothesizes that because his damages exceed the policy limits, if he settled with Joshua Hof-tiezer for the policy limits and then brought suit against Thomas Hoftiezer for negligent entrustment, Thomas — the insured who purchased the policy — “would have absolutely no coverage” in violation of these cases. However, the liability limit does not deny coverage to either insured.

[¶ 15.] On the contrary, even though Schulte’s damages may exceed the $100,000 liability limit, both Thomas Hof-tiezer and Joshua Hoftiezer are provided coverage for the damages sustained as a result of their separate alleged acts of negligence. It is only the limit of coverage for this accident that is qualified. As the Wisconsin Supreme Court observed in Folkman v. Quamme, 264 Wis.2d 617, 665 N.W.2d 857, 879 (2003):

[t]his observation ... does not alter the fact that Debra and Kenneth Sr. were both extended coverage; they merely happened to share the same liability subject to one limit of liability. The coverage purchased by the Folkmans is not illusory because the policy accurately and fairly set out its liability coverage terms in an unambiguous fashion and coverage was extended to each insured.

Similarly, Murbach v. Noel, 343 Ill.App.3d 644, 278 Ill.Dec. 426, 798 N.E.2d 810, 813 (2003) rejected Schulte’s argument that a single limit “violates public policy because if State Farm exhausts the limits of liability paying a judgment against one insured, other potentially liable insureds will be left without coverage for judgments against them.” The Murbach court noted:

Because the injured person may have but one recovery, indemnification of one insured reduces the liability of others covered under, the policy who are jointly and severally liable. Stated differently, any particular insured’s exposure for a judgment in excess of the policy limits is the same regardless of the number of insureds under the policy and on whose behalf the policy proceeds are nominally paid. Accordingly, imposing a stated limit of liability that does not vary with the number of insureds is not contrary to public policy.

Id.

[¶ 16.] Consequently, coverage is not being denied or 'reduced to either insured in this case. The coverage required by the omnibus statute has been provided., It is the premise of Schulte’s argument that is incorrect. Contrary to Schulte’s premise, Progressive “did extend coverage to all .... insureds. The problem the [two] insureds face is not that [they] were not covered under the policy. The problem is that the named insured did not purchase a greater amount of per occurrence liability.” Folkman, 665 N.W.2d at 874.

      . We recite the facts from Schulte’s Complaint because Progressive did not dispute them for the purpose of deciding the summary judgment motions.

      . In Progressive’s policy, “Accident” is defined as “a sudden, unexpected, and unintended occurrence.” The liability limit is “the most [Progressive] will pay regardless of the number of: 1. claims -made; 2. covered vehicles; 3. trailers shown on the Declarations Page; 4. insured persons; 5. lawsuits brought; 6. vehicles involved in an accident; or 7. premiums paid.” (Emphasis added.) Under the policy, ”[t]he .'each person’ limit of liability includes the total of all claims made for bodily injury to a person....”

      . Interpreting similar statutes, a majority of courts have rejected theories of separate recoverable limits in one accident from two insureds: Infinity Ins. Co. v. Dodson, 2000 MT 287, ¶¶ 28-29, 45, 302 Mont. 209, 14 P.3d 487, 492-93, 496 (“fact that an accident involved multiple liable insureds is inconsequential”); GRE Ins. Group v. Green, 194 Ariz. 251, 980 P.2d 963, 965-66 (1999) (court looks to accident itself and the number of persons injured to determine liability limits); Am. Standard Ins. Co. of Wis. v. May, 972 S.W.2d 595, 600 (Mo.Ct.App.1998) (policy limits directed to insured vehicles, not the insureds; statute requires each ’insured vehicle be insured). But see Johnson v. Windsor Ins. Co., 268 Va. 196, 597 S.E.2d 31, 34 (2004); Iaquinta v. Allstate Ins. Co., 180 Wis.2d 661, 510 N.W.2d 715, 718 (1993).

      . The driver must either own the insured vehicle or have the "express or implied permission of the named insured” to fall under SDCL 32-35-70.

      . It should also be noted that if coverage is exhausted on the first insured, the second insured has a remedy. ' As in all' other cases where damages exceed coverage and one tort-feasor pays more than their pro rata share of the liability, the remedy is to seek contribution among joint tortfeasors! See SDCL 15-8-11 et seq.-

      ., It should be additionally noted that the total liability of all tortfeasors often exceeds the total amount of insurance coverage available ■ to- in'süreds, subjecting them to personal liability for the difference!