Opinion
No. C6-01-292.
Filed October 9, 2001.
Appeal from the District Court, Ramsey County, File No. C1993689.
James A. Wade, Paul W. Wojciak, (for appellants)
Daniel J. Connolly, Chad M. Oldfather, Kristin R. Eads, (for respondent Critical Care Services, Inc.)
Timothy R. Schupp, Heidi A. Schneider, (for respondent Air Regent Investors, Inc.)
Considered and decided by Toussaint, Chief Judge, Klaphake, Judge, and Halbrooks, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2000).
UNPUBLISHED OPINION
Appellant Beech Transportation (ACI) sued respondent Critical Care Services, Inc. (Life Link) and respondent Air Regent Investors, Inc. (Air Regent), after a thunderstorm severely damaged ACI's unhangared airplane. ACI had an agreement with Life Link to provide chartered aircraft services for Life Link's air ambulance operation. Life Link had a sublease agreement with Air Regent to provide hangar space for ACI's airplane, but no agreement existed between ACI and Air Regent.
Following trial, the court concluded that under the contract between them, Life Link owed a duty to ACI to hangar the plane, but that ACI breached other terms of the contract by failing to maintain adequate hull insurance and to name Life Link as an insured under its liability insurance policy. The district court further concluded that ACI was a third-party beneficiary of the sublease between Life Link and Air Regent for hangar space, but because Life Link had waived its right to recover under the sublease for damages to the aircraft, ACI, as a third-party beneficiary, was barred by this waiver and thus could not recover from Air Regent. Because the district court did not err in its interpretation of the two agreements, we affirm.
DECISION I. ACI/Life Link Services Agreement A. Hangaring of Plane
Life Link argues that its contract with ACI was fully integrated and that it contained no hangaring provision. The district court allowed testimony on the hangaring of ACI's plane and concluded that the parties intended a hangaring provision be included as part of the agreement. The question of whether a contract fully integrates the parties' agreement is a legal question for the district court. Apple Valley Red-E-Mix, Inc. v. Mills-Winfield Eng'g Sales, Inc., 436 N.W.2d 121, 123 (Minn.App. 1989), review denied (Minn. Apr. 26, 1989). Questions of law are reviewed de novo by the appellate court. Art Goebel, Inc. v. N. Suburban Agencies, 567 N.W.2d 511, 515 (Minn. 1997). Findings of fact by the district court will not be set aside unless they are clearly erroneous. Minn.R.Civ.P. 52.01.
In construing a contract, a reviewing court attempts to ascertain the intent of the parties from the written document. Carl Bolander Sons, Inc. v. United Stockyards Corp., 298 Minn. 428, 433, 215 N.W.2d 473, 476 (1974). If the words of the contract are plain and unambiguous, the court is to uphold the plainly expressed intent of the parties. Id. Even if no ambiguity exists on the face of a contract, a reviewing court may consider extrinsic evidence to determine if the written contract fully integrates the terms of the parties' agreement. Telex Corp. v. Balch, 382 F.2d 211, 216 n. 6 (8th Cir. 1967).
Under the contract between ACI and Life Link, ACI provided a dedicated airplane and undertook the responsibility for all operations involving the airplane, including flying, maintenance, and inspection. Life Link provided medical personnel and medical equipment for the air ambulance business. The contract clearly assigns responsibilities for all aspects of the operation, but is silent regarding hangaring the aircraft. The district court concluded that the agreement between ACI and Life Link was not ambiguous, but because provision of hangar space was essential to the parties' agreement, it failed to fully integrate the agreement of the parties. The court based its conclusion on several findings, summarized as follows:
(1) ACI's president testified that she would not leave a plane at a location without hangaring service.
(2) Both ACI and Life Link understood that hangaring was essential to an agreement between them.
(3) The agreement did not address hangaring.
(4) The agreement obligated ACI to leave the plane at a location where ACI had no hangar.
(5) Life Link rented hangar space for the plane upon entering into the agreement. When the original hangar space was lost, Life Link rented hangar space with Air Regent.
(6) The agreement clearly delineates respective liabilities of the parties: Life Link had to cover all liability associated with the medical aspect of the air ambulance service. ACI had to cover any liability for "all activities incidental to the operation of the aircraft" including coverage against legal liability on behalf of the hangar keeper, and to maintain adequate hull insurance.
These summarized findings are well supported by the evidence in the record.
The court may consider the acts and conduct of parties to a contract in construing a contract. Donnay v. Boulware, 275 Minn. 37, 43, 144 N.W.2d 711, 715-16 (1966). Inclusion of a hangaring provision in the contract more fully explains the conduct of the parties and is consistent with the apparent intentions of the parties to the contract. Location of the plane at Holman Field was an essential term, but ACI would not leave a plane there without a hangar. Trial testimony suggested that ACI would have been unable to procure hangar space from its competitors at Holman Field, but that Life Link was able to arrange for space. Life Link's lease of hangar space began with the effective date of the agreement. The district court's conclusion that the contract was not fully integrated without a hangaring provision reasonably reflects the parties' intent and is not clearly erroneous.
B. Services Agreement
ACI argues that the district court erred in ruling that it breached the services agreement by failing to (1) maintain adequate hull insurance; (2) add Life Link as an additional insured; and (3) obtain or try to obtain a waiver of subrogation rights from the insurer on behalf of Life Link.
ACI agreed to maintain a policy of insurance for "all activities incidental to the operation [of the aircraft]" and to
indemnify and hold harmless [Life Link] from and against any and all claims, damages and liabilities * * * arising from any litigation, arbitration, governmental inquiry or other proceeding commenced by any third party in connection with the ownership, operation, custody, control, inspection, maintenance, or repairs of the Aircraft by ACI, its officers, directors, employees or agents.
ACI also agreed to provide "[a]dequate aircraft hull insurance." While "adequate aircraft hull insurance" is not defined in the contract, the waiver of subrogation under this provision is a "waiver of its insurer's right to recover any amounts from [Life Link.]" (Emphasis added.) This language mandates that the hull insurance had to be sufficient to cover against total loss of the aircraft.
According to trial testimony given by the insurance agent, although Life Link had the same coverage that any charter passenger would have, this general coverage was not as extensive as that required by the contract. Further, no attempt had been made to waive the insurer's subrogation rights. The hull insurance coverage was $200,000 less than the blue book value of the plane, or only 22% of the plane's value. Because this coverage would be inadequate to protect Life Link from paying "any" amount in the event of damage to the airplane, the district court did not err in concluding that ACI breached the contract by failing to secure the insurance required by the services agreement.
This case is similar to Buckey v. Indianhead Truck Line, Inc., 234 Minn. 379, 48 N.W.2d 534 (1951). Buckey leased his truck to Indianhead and agreed to provide "adequate" collision insurance, while Indianhead agreed to carry cargo, property, and liability insurance. Id. at 381, 48 N.W.2d at 535. Buckey recovered partially from his insurer after the accidental loss of the truck and then sued Indianhead, arguing that it was invalid or unfair for Indianhead to contract out of responsibility for its own negligence. Id. at 383-84, 48 N.W.2d at 536-37. The court concluded it was "obvious" that by contracting for "adequate" insurance, the parties had intended that Indianhead would have the benefit of the insurance, "so that no claim would lie against it for that portion of [Buckey's] loss against which he was obliged to protect himself by insurance." Id. at 385, 48 N.W.2d at 538. In reference to the partial recovery, the court stated that Buckey should not be "heard to complain of his own breach of contract" by failing to obtain adequate insurance. Id. at 385, 48 N.W.2d at 537. Similarly, ACI should not benefit by its failure to maintain adequate hull insurance or meet its contractual obligation to provide liability coverage.
II. Bailment
ACI argues that the district court erred in concluding that no bailment relationship existed between ACI and Life Link or between Life Link and Air Regent. A bailment relationship requires three elements: (1) delivery without transfer of ownership; (2) implied or express acceptance; and (3) an express or implied agreement that the goods be returned. Wallinga v. Johnson, 269 Minn. 436, 438, 131 N.W.2d 216, 218 (1964). "The generally accepted test is whether there is a full transfer of the property, amounting to relinquishment of exclusive possession, control and dominion over the property for the duration of the relationship." Colwell v. Metro. Airports Comm'n, Inc., 386 N.W.2d 246, 248 (Minn.App. 1986) (citation omitted).
The district court concluded that no bailment relationship existed because "[t]here was no full transfer of the Aircraft, amounting to relinquishment of exclusive possession, control and dominion over the property to create a bailment relationship." The evidence fully supports this conclusion. That evidence showed: (1) although Air Regent was responsible for the actual movement in and out of the hangar, that movement took place when ACI requested it; (2) ACI retained the right to substitute another plane for the dedicated aircraft and Air Regent did not have the right to use or perhaps even move the aircraft without an order from ACI; (3) ACI was responsible for all maintenance, repair and inspection of the aircraft; and (4) ACI had no direct relationship with Air Regent except through Life Link, but Life Link had no right to move the plane. Thus, because ACI did not relinquish control over the plane, the district court did not err in concluding that no bailment existed.
III. Summary Judgment
ACI asserts that the district court erred in granting summary judgment to Life Link on the issue of damages. In the first phase of this bifurcated trial, the court ruled that ACI could recover from Life Link any damages not covered by insurance that were not a result of ACI's own breach of contract. In the second phase of trial, the court granted Life Link's motion for summary judgment based on its conclusion that ACI's unreimbursed hull and loss of use damages resulted from its breach of contract.
Summary judgment is appropriate where there is no genuine issue of material fact and either party is entitled to judgment as a matter of law. Minn.R.Civ.P. 56.03. ACI argues that the district court erred in concluding that the phrase "all activities incidental to the operation" included hangaring. In phase one, the district court had determined that this phrase encompassed all activities of the plane necessary to its operation and was not limited to air taxiing services alone. Based on this determination, the court properly granted summary judgment in phase two, and concluded that ACI was responsible for total insurance coverage of the plane and that by failing to insure for loss of use, ACI had waived any claim against Life Link for loss of use.
IV. Third-Party Beneficiary
ACI argues that the district court erred in dismissing its complaint against Air Regent based on the court's conclusion that ACI was a third-party beneficiary of the sublease agreement between Air Regent and Life Link. Because Life Link had waived all claims for damages against Air Regent as part of the sublease, the court reasoned that ACI had no greater rights than Life Link and thus could not assert a damage claim against Air Regent. ACI claims that because it was not a party to the sublease, it could not have voluntarily relinquished its rights and thus is not bound by Life Link's waiver.
ACI's relationship with Air Regent derives solely from ACI's contract with Life Link and Life Link's sublease with Air Regent. The district court concluded that Life Link had a duty to ACI to hangar ACI's plane under the agreement between them. Under the sublease agreement between Air Regent and Life Link, Air Regent owed a duty to Life Link, but not to ACI, with whom it had no contractual relationship, to hangar the plane. ACI, then, is not a party to this contract, but rather a third-party beneficiary of the contract between Life Link and Air Regent. See Cretex Cos. v. Constr. Leaders, Inc., 342 N.W.2d 135, 139 (Minn. 1984) (third-party may recover under contract to which it is not a party, when third party is intended beneficiary of contract). Here, the sublease between Life Link and Air Regent conferred a benefit on ACI, by providing hangar space needed by ACI. The sublease directly benefited Life Link, who had a duty to provide hangaring, and indirectly benefited ACI.
A third-party beneficiary is bound by the same terms and subject to the same defenses as the promissee to a contract. Robbins v. Prosser's Moving Storage Co., 700 F.2d 433, 436 (8th Cir. 1983), aff'd and remanded by Schneider Moving Storage Co. v. Robbins, 466 U.S. 364, 370-71, 104 S.Ct. 1844, 1848 (1984). Likewise, the promisor can assert any defense against the third-party beneficiary that could be asserted against the promissee. Id. Because Life Link had waived its rights against Air Regent, Air Regent could raise the defense of waiver against ACI.
ACI argues that it did not knowingly and intelligently waive its rights against Air Regent. It is true that a waiver must be an intentional relinquishment of a known right. Hedged Inv. Partners, L.P. v. Norwest Bank Minn., N.A., 578 N.W.2d 765, 771 (Minn.App. 1998). Intent to waive a right, however, can be inferred from conduct. Id. Certainly, ACI could hardly be unaware that Air Regent was providing hangar space for its plane. By not involving itself in these arrangements or seeking assurance about liability coverage, ACI can be said to have waived its rights by acquiescence in the arrangement. The district court's conclusion is not erroneous.
V. Deposition Testimony
ACI challenges the district court's exclusion of certain deposition testimony. A district court's evidentiary rulings will be upheld unless the court abused its discretion or based its decision on an erroneous view of the law. Shea v. Esensten, 622 N.W.2d 130, 134 (Minn.App. 2001). Even if erroneous or an abuse of discretion, an improper evidentiary ruling is grounds for reversal only if the evidence "might reasonably have changed the result of the trial if it had been admitted." Id. (citation omitted).
A deposition of a party or representative of a party can be used "by an adverse party for any purpose." Minn.R.Civ.P. 32.01(b); s ee Coletti v. Cudd Pressure Control, 165 F.3d 767, 773 (10th Cir. 1999) (construing Fed.R.Civ.P. 32 to permit use of a deposition even where deponent is available for trial). But the court may limit the use of deposition testimony. Id. at 774 n. 4 (even if statements may qualify for admission under evidentiary exception "that does not mean the depositions are then automatically available for the Plaintiff to read into evidence in lieu of live testimony.")
The particular portion of deposition testimony that ACI sought to introduce posed a hypothetical question to the witness. Even if this added something to the evidence and was not objectionable, it certainly does not qualify as testimony that would have changed the outcome of the trial. The district court did not abuse its discretion and its ruling was not prejudicial.