Fraudulent Conduct and Jurisdiction

In Kraus-Anderson Capital v. Alamo Medical Supply & Equipment, Inc. the California Court of Appeal (2nd Dist.) upheld a trial court’s finding that the Minnesota Courts had the jurisdiction to enforce a promisory note executed in California.

The facts here are typical of many finance transactions. An out of state financier lends money to a customer of expensive, specialized equipment. The customer executes a promisory note and security agreement. The vendor executes a remarketing agrement obligating the vendor to recover the collateral and provide for remarketing, a common mechanism facilitating the sale of specialized equipment.

The customer in this case defaulted, and the financier sought to recover its collateral and call upon the vendor to re-market the equipment. The financier then discovered that the equipment was misrepresented and that the vendor defaulted on the remarketing agreement. The financier obtained a judgment in its home state (Minn.) against the vendor for the fraudulent equipment and the breach of the remarketing agreement. The financier then sought to domesticate the sister-state judgment in California, prompting the vendor to challenge the judgment on jurisdictional grounds. The California trial court denied the motion and the Court of Appeal affirmed.

In a scholarly analysis the appellate court found that the sister-state court properly had jurisdiction over the vendor.

The message from this case is that a financier is entitled to seek relief in its home court given a breach of a remarketing agreement by an out of state vendor.

Read the full opinion here.


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