S J TRANSPORT STORAGE v. NELSON

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Docket Number

No. C6-99-842.

Attorney(S)

Thomas P. Malone, Bradley A. Kletscher, Barna, Guzy Steffen Ltd., (for appellants) Gregory A. Lang, Mark N. Stageberg, Gregory A. Lang, P.A., (for respondents)

Judges

DAVIES, Judge (dissenting)

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S J Transport and Storage, et al., Appellants, v. Bruce Nelson, et al., Respondents, Aetna Life Casualty Company n/k/a Tra

This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (1998).

UNPUBLISHED OPINION

SCHUMACHER, Judge

Appellants S J Transport and Storage and Francis Smith challenge an adverse summary judgment, claiming the district court erred in concluding there was no issue of material fact regarding their contract and promissory estoppel claims. We conclude the district court properly interpreted the contract, but remand for findings on the award for attorney fees. We affirm in part, reverse in part, and remand.

FACTS

S J Transport and respondent Goldeneye Products, Inc., entered into a written three-year lease on August 1, 1995, where Goldeneye leased land from S J Transport. The lease was executed by Smith, one of the partners of S J Transport, and respondent Bruce Nelson, the president of Goldeneye.

Nelson and Smith discussed casualty insurance coverage for the property at the time of the signing of the lease. On the day the lease was signed, Smith presented Nelson with an insurance invoice that indicated there was a casualty coverage premium due on September 1, 1995, for a renewal term of September 1995 to September 1996. Nelson and Smith agreed that Goldeneye would cover this premium, but the basis for this obligation was disputed. Nelson stated that he and Smith agreed that Goldeneye was not obligated to provide casualty insurance coverage for the building under the terms of the lease, but would do so in exchange for some repairs to the building. Smith stated that he and Nelson agreed that under the terms of the lease, Goldeneye was required to provide casualty insurance coverage for the building.

S J Transport and Smith received an insurance certificate naming S J Transport as a co-insured with Goldeneye in October 1995. The duration of time that Goldeneye agreed to pay for insurance coverage was never specifically discussed. Casualty coverage was provided for the building until July 1997.

S J Transport and Smith did not receive any additional insurance certificates indicating casualty coverage beyond the initial certificate, dated May 7, 1995, to May 7, 1996. Goldeneye switched insurance providers in 1997, and S J Transport was dropped from Goldeneye's policy.

On March 29, 1998, a tornado destroyed the building. S J Transport and Smith brought suit, claiming they were entitled to reimbursement for the cost of the building. The district court initially granted summary judgment to Nelson and Goldeneye on written and oral contract claims by S J Transport and Smith. The court later granted summary judgment on the promissory estoppel issue and awarded Nelson and Goldeneye attorney fees in the amount of $8,500.

DECISION

On appeal from summary judgment, this court asks whether there are any genuine issues of material fact and whether the district court erred in applying the law. Norwest Bank Minn. ex rel. Vickerman v. State Farm Mut. Auto. Ins. Co. , 588 N.W.2d 743, 745 (Minn. 1999). This court must view the evidence in "the light most favorable to the party against whom judgment was granted." Fabio v. Bellomo , 504 N.W.2d 758, 761 (Minn. 1993). The interpretation of a contract is a question of law as applied to the facts presented. Turner v. Alpha Phi Sorority House , 276 N.W.2d 63, 66 (Minn. 1979). This court reviews a grant of summary judgment involving questions of law de novo. Vickerman, 588 N.W.2d at 745.

1. S J Transport and Smith claim that the district court erroneously concluded that the written lease unambiguously required Nelson and Goldeneye to provide personal liability, and not casualty, insurance coverage. The primary purpose in construing a contract is to give effect to the intention of the parties as expressed in the language they used in drafting the entire contract. Art Goebel, Inc. v. North Suburban Agencies, Inc. , 567 N.W.2d 511, 515 (Minn. 1997). A contract is ambiguous if, based upon its language alone, it is reasonably susceptible to more than one interpretation. Id . The court must "fastidiously guard against the invitation to create ambiguities where none exist." Columbia Heights Motors, Inc. v. Allstate Ins. Co. , 275 N.W.2d 32, 36 (Minn. 1979) (citation and quotation omitted).

The lease provision in question provides:

11. Insurance. Lessee, at his expense, shall maintain plate glass and public liability insurance including bodily injury and property damage insuring Lessee and Lessor with minimum coverage as follows:

Lessee shall provide Lessor with a Certificate of Insurance showing Lessor as additional insured. The Certificate shall provide for a ten-day written notice to Lessor in the event of cancellation or material change of coverage. To the maximum extent permitted by insurance policies which may be owned by Lessor or Lessee, Lessee and Lessor, for the benefit of each other, waive any and all rights of subrogation which might otherwise exist.

S J Transport and Smith contend that this provision is ambiguous because the phrase "property damage" can be reasonably interpreted as indicating casualty insurance coverage for the building. These terms may have varying meanings, but that does not necessarily or conclusively show ambiguity. See Board of Regents v. Royal Ins. Co. of Am ., 517 N.W.2d 888, 892 (Minn. 1994) (just because a word has more than one meaning does not mean it is ambiguous). "The sense of a word depends on how it is being used; only if more than one meaning applies within that context does ambiguity arise." Id .

The district court held that the phrase "property damage" referred back to the "plate glass and public liability" coverage that is specifically addressed in the contract. The district court's interpretation of the lease provision was correct.

2. S J Transport and Smith also argue that the district court erroneously concluded that there were no disputed material facts regarding the oral agreement reached between Smith and Nelson concerning Nelson and Goldeneye carrying casualty insurance for the leased property. This contention is foreclosed by the parol evidence rule. The general rule is that parol evidence is not allowed to alter the terms of a clear and unambiguous contract. Norwest Bank Minn. v. Midwestern Mach. Co. , 481 N.W.2d 875, 881 (Minn.App. 1992), review denied (Minn. May 15, 1992). The parol evidence rule prohibits evidence of any prior or contemporaneous oral agreements to be used to contradict the terms of a fully integrated contract. Id. An exception to the general rule allows evidence of subsequent conversations that alter the terms of the written contract where the evidence is

clear and convincing to justify setting aside a written contract and holding it as abandoned or substituted by a subsequent parol contract at variance with its terms.

Id. (citation and quotation omitted).

There was some dispute as to whether Smith and Nelson's conversation regarding the casualty insurance coverage happened before or after signing the lease. The district court concluded that S J Transport and Smith failed to offer any credible evidence as to when the conversation about casualty insurance coverage took place and therefore that no dispute over a material fact existed.

The insurance coverage Nelson and Goldeneye were required to provide under the contract was unambiguous. The district court's decision to grant summary judgment, in the absence of credible evidence by S J Transport and Smith of a subsequent agreement to modify the terms of the contract, was not erroneous. See DLH, Inc. v. Russ , 566 N.W.2d 60, 70-71 (Minn. 1997) (summary judgment is appropriate where nonmoving party merely creates metaphysical doubt as to factual issue that is not sufficiently probative to permit reasonable persons to draw different conclusions).

3. S J Transport and Smith next challenge the district court's dismissal of their promissory estoppel claim. A reviewing court considers de novo whether the evidence raises a fact issue sufficient to submit a promissory estoppel claim to a jury. Spanier v. TCF Bank Sav. , 495 N.W.2d 18, 20 (Minn.App. 1993), review denied (Minn. Mar. 22, 1993). Promissory estoppel requires (1) a promise, (2) the promisor expected or reasonably should have expected the promise would induce action or forbearance, (3) the promise did induce action or forbearance, and (4) the promise must be enforced to avoid injustice. Grouse v. Group Health Plan, Inc ., 306 N.W.2d 114, 116 (Minn. 1981) (quoting Restatement of Contracts § 90 (1932)).

In this case, S J Transport and Smith cannot use promissory estoppel to alter the unambiguous contract by using parol evidence. Banbury v. Omnitrion Int'l, Inc ., 533 N.W.2d 876, 881 (Minn.App. 1995) (party cannot use doctrine of promissory estoppel to alter an unambiguous contract by using evidence barred by parol evidence rule).

4. S J Transport and Smith contend that the district court abused its discretion in awarding attorney fees to Nelson and Goldeneye. An award of attorney fees will not be reversed absent an abuse of discretion. Domtar, Inc. v. Niagara Fire Ins. Co ., 563 N.W.2d 724, 740 (Minn. 1997).

The reasonable value of an attorney's services has generally been characterized as a question of fact, and a [district] court's findings on that issue should therefore be upheld unless clearly erroneous.

Ryan v. Bigos Properties , 351 N.W.2d 680, 681 (Minn.App. 1984) (citation omitted).

The district court found that Nelson and Goldeneye were entitled to attorney fees under the lease. The lease provides:

18. Attorney's Fees. In case suit should be brought for recovery of the premises, or for any sum due hereunder, or because of any act which may arise out of the possession of the premises, by either party, the prevailing party shall be entitled to all costs incurred in connection with such action, including a reasonable attorney's fee.

The district court's finding that this provision entitled Nelson and Goldeneye to attorney fees was not clearly erroneous.

Nelson and Goldeneye claim that the district court's award of attorney fees bears no reasonable relationship to the services provided. Nelson and Goldeneye submitted an affidavit supporting their claim for an award of attorney fees in the amount of $59,205. The district court awarded Nelson and Goldeneye attorney fees in the amount of $8,500 but did not provide any reasoning by way of findings. The district court must provide findings on the basis of its award. See Anderson v. Hunter, Keith, Marshall Co. , 417 N.W.2d 619, 630 (Minn. 1988) (holding when reasonableness of attorney fees is challenged, district court should scrutinize it and make findings explaining its award).

S J Transport and Smith claim that the award of attorney fees was improper because it was decided by a different judge from the judge who granted the first summary judgment motion. This argument is meritless. See In re Estate of Hallock , 221 Minn. 25, 30, 20 N.W.2d 881, 883 (1945) (new judge has authority to make corrections in conclusions of law to conform to findings of fact).

Affirmed in part, reversed in part, and remanded.

DAVIES, Judge (dissenting)

I concur that summary judgment was properly granted on the contract claims, for the lease does not require casualty (fire and wind) coverage.

But I respectfully dissent because there are material facts in dispute relating to the promissory-estoppel issue. Summary judgment was not proper on that claim. There is evidence that an oral promise to provide casualty insurance for the building was made sometime after the signing of the lease, and thus separate from and independent of the lease. If a jury accepted that the promise was made later and that the promise was reasonably relied on by appellants, there would be promissory-estoppel liability.

Promissory estoppel is "a doctrine based on reliance which courts may use in a proper case to prevent injustice." Constructors Supply Co. v. Bostrom Sheet Metal Works, Inc . , 291 Minn. 113, 120, 190 N.W.2d 71, 75 (1971). Promissory-estoppel liability turns on whether: (1) there was a "clear and definite promise"; (2) the promisor intended to induce reliance on the promise and reliance occurred; and (3) the promise must be enforced to prevent injustice. Ruud v. Great Plains Supply, Inc., 526 N.W.2d 369, 372 (Minn. 1995).

The Restatement (Second) of Contracts in comment e to § 90 (1979) specifically addresses gratuitous promises to procure insurance. This comment starts circumspectly:

This Section is to be applied with caution to promises to procure insurance. The appropriate remedy for breach of such a promise makes the promisor an insurer, and thus may result in a liability which is very large in relation to the value of the promised service. Often the promise is properly to be construed merely as a promise to use reasonable efforts to procure the insurance, and reliance by the promisee may be unjustified or may be justified only for a short time. Or it may be doubtful whether he did in fact rely.

The comment then becomes more affirmative in tone, suggesting that liability is proper in circumstances comparable to this case:

Such difficulties may be removed if the proof of the promise and the reliance are clear, or if the promise is made with some formality, or if part performance or a commercial setting or a potential benefit to the promisor provide a substitute for formality.

Restatement (Second) of Contracts § 90 cmt. e (1979).

The latter portion of the comment applies forcefully to this case. It is undisputed that appellants relied, that respondents provided the insurance for two full years, that the alleged promise was made in a commercial setting, and that the alleged promisor (respondents) realized a benefit from the promised action.

The evidence here must be viewed in the light most favorable to the party against whom summary judgment was granted. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).

[T]he function of the district court on a motion for summary judgment is not to weigh the evidence.

* * * *

The district court's function on a motion for summary judgment is not to decide issues of fact, but solely to determine whether genuine factual issues exist.

DHL, Inc. v. Russ, 566 N.W.2d 60, 70 (Minn. 1997).

In this case, the district court erred, in deciding the summary judgment motion, by weighing the evidence and deciding an issue of fact, rather than determining whether there existed a factual issue that would preclude summary judgment.

As the majority points out, it was disputed whether the oral promise to provide casualty insurance was made at the time of signing the lease or if it was, instead, made after the lease was signed. In this case, the question of when the promise was made and whether reliance was reasonable are questions of fact, which must be submitted to a jury.

Appellants argue that the promise to provide casualty insurance was made later when respondents' president, Bruce Nelson, "got back" to Francis Smith with a correct insurance certificate. Appellants offered the following testimony from Nelson to support its contention that, although the insurance coverage was discussed to some extent on the day the lease was signed, the promise to provide casualty insurance was not made until after Nelson "got back" to Smith.

Q: So, your testimony is that you discussed insurance on the day you signed the lease, but you don't know whether it was before or after you signed it; is that right?

A: Yes.

And later:

Q: When you told Mr. Smith on the day you signed the lease that you would pay the invoice, did you know then you would not pay the invoice, but instead you were going to get it through your own carrier?

A: I believe I indicated to him I was going to check to see if we could get it for less money through our own carrier.

* * * *

Q: Did you know that you were going to get it for less money through your own carrier when you told Mr. Smith that you would pay the invoice?

A: No.

Q: So, at the time you agreed with Mr. Smith to pay the invoice, you weren't sure whether or not you were going to go with your carrier or pay the invoice; isn't that correct?

A: Yes.

This inconsistent testimony points to the existence of a disputed material fact. Furthermore, although Nelson also testified that the promise was made on the day the lease was signed, he did not unambiguously testify that the promise was made contemporaneously with — not after — the lease signing.

The district court erred by weighing the evidence, rather than determining whether a disputed factual issue existed. I respectfully dissent because there was evidence that put in dispute the factual issue of when the promise to provide insurance was made; thus, the promissory-estoppel claim should not have been dismissed on summary judgment.

The majority devotes but one short paragraph to dispose of the promissory-estoppel claim. But that paragraph relies on a case in which the asserted promissory-estoppel promises were made contemporaneously with, or before, the execution of a valid written contract. See Banbury v. Omnitrion Int'l, Inc., 533 N.W.2d at 881 (Minn.App. 1995) (finding that promissory estoppel cannot be used to alter clear language in a contract). Here, the promissory-estoppel claim is founded on an independent promise that the respondents may have made some days, or at least hours, after contracting. Compelling evidence that the promise was made later is that, as the transaction should most logically have unfolded, the alleged promise to procure casualty insurance would have been made in response to dissatisfaction with the liability insurance policy that was initially provided under the lease, thus, after execution of the lease. Contrary to what the majority seems to assert, the promissory-estoppel claim is based on a promise allegedly made subsequent to and independent of the lease.

The district court, too, failed to see that there was admissible evidence to support that the promise was subsequent to and independent of the lease. The district court properly relied on the parol evidence rule in rejecting evidence offered to support the contract claims, but the parol evidence rule has no applicability to the alleged subsequent promise on which the promissory-estoppel claim is based.

The district court confusion is easily explained. Appellants were making inconsistent claims, saying: "If you see the facts this way we win on contract theory; if you see the facts this other way, we win on promissory estoppel theory." This is legitimate litigation strategy, but it makes for mushy evidence. But even ambiguous evidence defeats summary judgment.

The district court also concluded that appellant as a matter of law had a continuing obligation to monitor respondents' performance of any promise to obtain insurance. But this is a factual issue lying at the heart of the reasonableness of appellants' reliance; it provides no basis for summary judgment. See Norwest Bank v. Midwestern Mach., 481 N.W.2d 875, 880 (Minn.App. 1992), review denied (Minn. May 15, 1992) ("The reasonableness of a party's reliance is a fact question for the jury and not generally amenable to summary judgment.").

I would remand for trial on the promissory-estoppel claim and for reconsideration of the attorney fee award.

S J Transport and Storage, et al., Appellants, v. Bruce Nelson, et al., Respondents, Aetna Life Casualty Company n/k/a Tra

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