Opinion
No. C2-01-2105
Filed July 23, 2002.
Appeal from the District Court, Grant County, File No. C50076.
Michael M. Fluegel, Fluegel, and Robert D. Martin (pro hac vice), (for appellant)
James T. Martin, (for respondent)
Considered and decided by Kalitowski, Presiding Judge, Lansing, Judge, and Anderson, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2000).
UNPUBLISHED OPINION
In this breach-of-contract action, appellant Dri-Kleen, Inc. challenges the district court's orders denying its motions for summary judgment, judgment notwithstanding the verdict (JNOV), and a new trial. Appellant contends (1) the court erred in failing to rule that its building was a total loss as a matter of law; (2) the court abused its discretion by admitting evidence of an unrelated complaint and an insurance trade publication; and (3) appellant's due process rights were violated because respondent Western National Mutual Insurance Group waited until after the verdict to assert a counterclaim. Respondent filed a notice of review and argues that based on the policy's internal two-year limitation for filing actions, the district court erred in not granting its motion for judgment on the pleadings. We affirm.
DECISION I.
Appellant argues the district court erred by denying appellant's motions for summary judgment, judgment notwithstanding the verdict, and a new trial. The standards of review for these motions are similar. See Howie v. Thomas, 514 N.W.2d 822, 825 (Minn.App. 1994) (stating standards for summary judgment and directed verdict are similar); American Mach. Tool Co., Inc. v. Strite-Anderson Mfg. Co., 353 N.W.2d 592, 598 (Minn.App. 1984) (recognizing directed verdict and JNOV have same standard), review denied (Minn. Sept. 12, 1984). On appeal from summary judgment, an appellate court considers whether any genuine issue of material fact exists and whether the district court erred in applying the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). On appeal from a denial of summary judgment, we view the record in the light most favorable to the nonmoving party. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).
Appellant asserts that the concrete slab is a foundation as a matter of law, and as a result, the policy does not cover the foundation and its existence or value should not be considered in determining whether the building was a total loss. We disagree.
In January 1997, appellant's building was damaged when a heavy snowfall caused the roof of the facility to collapse. Respondent provided insurance coverage for damage to appellant's building and for appellant's loss of income caused by covered perils, and respondent ultimately paid to have a new building erected on the site. The policy provides coverage "for direct physical loss" or "damage" to the covered property, and the policy limit was $1,209,000 for a "total loss." But the policy does not provide coverage for the foundation of the building below the surface of the ground.
Appellant asserts that it was entitled to summary judgment as a matter of law, citing Minn. Stat. § 65A.08, subd. 2 (2000), which states that an insured is entitled to receive the policy limits on a valued policy if the damage to a covered item results in a total loss. The parties do not dispute that this was a valued policy. Thus, the issue is whether the damage at issue constituted a total loss. Appellant asserts that no issue of material fact existed because only the concrete slab was intact and that slab was a foundation as a matter of law.
The district court made the following findings of fact in its thorough and well-reasoned order denying appellant's motion for summary judgment: the policy limit of $1,209,000 was set by respondent after a reasonable inspection of the property; appellant's facilities collapsed as a result of a winter storm; the sum for labor and materials for concrete work, including foundation slabs and driveways, totaled about $226,500; the concrete slabs were undamaged by the collapse; and the concrete slabs were used by appellant in the reconstructed facility.
The district court correctly noted that to determine whether a total loss occurred, the insured or "covered" property must be identified. The court reasoned that if an item was not destroyed by the snowstorm and was used in the new facility, it would not matter in determining if a total loss occurred because that item was not covered and included in the value of the insured property as set by the parties.
The court found that the parties presented conflicting affidavits regarding the location of the foundation, and, as a result, the court concluded neither party was entitled to summary judgment because a fact issue existed as to whether the slab was covered property. The record supports this conclusion as it shows conflicting evidence as to whether the slab was above or below ground. Moreover, whether a total loss has occurred is generally a question of fact for a jury to decide. Northwestern Mut. Life Ins. Co. v. Rochester German Ins. Co., 85 Minn. 48, 63, 88 N.W. 265, 271 (1901). We conclude that the district court did not err in denying summary judgment.
Having concluded that the court properly denied summary judgment, we consider whether the district court abused its discretion in denying appellant's motions for a new trial and JNOV. An appellate court will not disturb the district court's decision to grant or deny a new trial absent a clear abuse of discretion. Halla Nursery, Inc. v. Baumann-Furrie Co., 454 N.W.2d 905, 910 (Minn. 1990). "[T]he verdict must stand unless it is manifestly and palpably contrary to the evidence, viewed in a light most favorable to the verdict." ZumBerge v. Northern States Power Co., 481 N.W.2d 103, 110 (Minn.App. 1992) (citation omitted), review denied (Minn. Apr. 29, 1992). Where the district court has denied a motion for JNOV, the denial must be affirmed if "there is any competent evidence reasonably tending to sustain the verdict." Pouliot v. Fitzsimmons, 582 N.W.2d 221, 224 (Minn. 1998) (quotation omitted).
The jury concluded that appellant's building was not a total loss. Northwestern Mut. Life Ins. Co. sets forth the test for determining whether a building is a total loss:
A building is not a total loss, * * * unless it has been so far destroyed * * * that no substantial part or portion of it above ground remains in place capable of being safely utilized in restoring the building to the condition in which it was before the [damage]. * * * There can be no total loss of a building so long as the remnant of the structure left standing above ground is reasonably and safely adapted for use * * * ; and whether it is so adapted depends upon the question whether a reasonably prudent owner of the building, uninsured, desiring such a structure as the one in question was before the [damage], would, in proceeding to restore the building, utilize such standing remnant as such basis.
85 Minn. at 52, 88 N.W. at 271.
The evidence shows that the warehouse buildings sat on a 5-inch thick, 41,000 square foot concrete slab. The west edge of the concrete slab was about four feet above ground and served as a loading dock. The east edge of the top of the slab was about eight inches above ground level. The slab served as the floor for both buildings, and the floor, by its nature, is above ground level. The foundation walls of the building consisted of poured concrete that rested on top of concrete footings that were set several feet below the frost line. These walls extended up from below the frost line to at least grade level on the east side of the buildings and four feet above the west side grade. The concrete slab sat on top of the foundation walls. Anchor bolts were installed in the slab for use in erecting the buildings.
Respondent's expert, a professional structural engineer, agreed that it was "a fair characterization of this loss to say that this was a total loss above the foundation" but went on to testify that the slab was not part of the foundation. Based on respondent's expert's testimony, the jury could have concluded the slab was not part of the foundation, was covered property, and was not a total loss. Because there is "competent evidence reasonably tending to sustain the verdict," we will not disturb the verdict. See Pouliot, 582 N.W.2d at 224.
II.
Absent erroneous interpretation of the law, the question of whether to admit or exclude evidence is within the district court's discretion. Kroning v. State Farm Auto. Ins. Co., 567 N.W.2d 42, 45-46 (Minn. 1997). "Entitlement to a new trial on the grounds of improper evidentiary rulings rests upon the complaining party's ability to demonstrate prejudicial error." Id. at 46 (quotation omitted).
First, appellant argues that the district court committed reversible error by admitting evidence of an unrelated complaint against appellant. We disagree. Over objection, the court admitted into evidence a federal court complaint filed in 1998 by a distributor against appellant and its founder, who testified at trial. The complaint alleged that appellant's founder defrauded investors and lied to distributors and management. Appellant contends the complaint was prejudicial hearsay that did not fall under any hearsay exception and its admission into evidence was reversible error. We disagree.
The district court properly determined that the evidence was relevant because appellant opened the door to this evidence by bringing a business interruption claim and blaming its business problems on the storm damage. The mere existence of the complaint contradicts appellant's claim that the building's collapse was the only cause of appellant's business problems and thus ultimately negates appellant's claim for additional business interruption losses. See Minn.R.Evid. 801, 802 (recognizing out of court statements offered to prove the truth of the matter asserted are inadmissible unless subject to a hearsay exception). Moreover, appellant's founder admitted the lawsuit was well publicized. Thus the allegations in the complaint were not introduced to prove their truth. The mere existence of the allegations could negatively impact appellant's business. Because the complaint was not admitted to prove the truth of the matter asserted, we conclude that the district court did not abuse its discretion by admitting the complaint into evidence.
We also note that the district court did not abuse its discretion in determining that appellant had not established that the error, if any, was prejudicial. See Kroning, 567 N.W.2d at 46 (stating error must be prejudicial to warrant a new trial). In his testimony unrelated to the complaint, appellant's founder admitted that he made several representations to distributors and management that were false. Thus, on these facts we cannot conclude the district court abused its discretion. And finally, because the jury heard about the allegations in the complaint during trial, any error in allowing the complaint to go to the jury was not prejudicial.
Second, appellant argues the district court committed reversible error by concluding that the claims adjuster was an expert and admitting evidence of an insurance trade publication as a treatise. We disagree. When reviewing a district court's ruling on the competence of a proffered expert witness, the appellate court must apply a deferential standard, reversing only if there is an abuse of discretion. Gross v. Victoria Station Farms, Inc., 578 N.W.2d 757, 760-61 (Minn. 1998).
The exhibit at issue is an insurance trade bulletin titled "Valuation of Concrete Slab Construction," which states that foundations under ground are excluded from coverage because they are not subject to perils under the policy and that "[t]he slab itself is certainly subject to damage — cracking or spalling from excess heat." The claims adjuster testified that adjusters frequently rely on the particular published trade bulletin to determine what is covered property and that he specifically relied on the publication on a regular basis in the course of his work as an insurance adjuster. Based on this testimony, the district court did not abuse its broad discretion in determining the adjuster was an expert in the area of claims adjusting or that the bulletin qualified as a learned treatise. See Minn.R.Evid. 803(18) (requiring foundation for a treatise as a reliable authority). Moreover, we agree with the district court that although it was error to allow the publication itself to be put into evidence rather than just be read to the jury, "this error did not prejudice or harm" appellant and "was not inconsistent with substantial justice * * * as the jury had heard its contents." We conclude the district court did not abuse its discretion by refusing to grant appellant a new trial on this ground.
III.
The district court has broad discretion to grant or deny leave to amend a complaint, and its ruling will not be reversed absent a clear abuse of discretion. Fabio, 504 N.W.2d at 761.
Appellant argues the district court denied appellant's right to due process by granting respondent's motion to amend the pleadings and entering judgment in favor of respondent on a counterclaim after the jury's verdict. Appellant also contends that respondent "improperly manipulated the trial proceedings so the jury would not know it sought money" from appellant and that this "maneuver" violated appellant's right to a jury trial as provided for in Minn. Const. art. I § 4. We disagree.
Minn. R. Civ. Proc. 15.02 provides that motions to amend the pleadings to conform to the evidence may be made "upon motion of any party at any time, even after judgment." The district court granted respondent's motion to amend the pleadings to conform to evidence that established that respondent purchased a new production-bottling line for appellant. The court found that appellant was indebted to respondent in the amount of $47,137.50 and ordered judgment in favor of respondent for that amount. The court subsequently denied appellant's motion to vacate the judgment, noting that respondent "properly gave notice of his motion to [appellant] who did not object until now." Respondent's adjuster testified that he agreed to buy appellant a new production bottling line at a cost of about $96,000, that appellant agreed to purchase the line from respondent at 50% of the cost, and that appellant had not paid respondent for the line. Appellant's corporate risk director agreed that appellant promised to pay respondent back 50% of the new line. Appellant's founder testified: "[W]e did agree to pay for half of that. I am not disagreeing with that, the forty-seven-five, whatsoever[.]" And appellant's attorney acknowledged the debt to respondent in his closing arguments.
The court found that no fact issue existed, and the record supports its conclusion regarding appellant's indebtedness. We agree. Moreover, appellant has produced no evidence that respondent "improperly manipulated the trial proceedings." Appellant argues this issue was "solely * * * within the province of the jury." Because appellant did not object at the time respondent made the motion to amend, and because no issue of material fact existed, appellant's right to a jury trial was not violated, and the district court did not abuse its discretion by granting respondent's motion to amend the complaint.
IV.
"Judgment on the pleadings is proper where the defendant relies on an affirmative defense or counterclaim which does not raise material issues of fact." Jacobson v. Rauenhorst Corp., 301 Minn. 202, 206, 221 N.W.2d 703, 706 (Minn. 1974) (citations omitted), overruled on other grounds, Farmington Plumbing and Heating Co. v. Fischer Sand Aggregate, Inc., 281 N.W.2d 838 (Minn. 1979).
Respondent argues the district court erred by not granting its motion for judgment on the pleadings because its policy prohibited suits more than two years after the date of the loss. We disagree.
Whether a contract is ambiguous or reasonably susceptible to more than one construction is a question of law, and an appellate court owes no deference to the district court's determination. Blackburn, Nickels Smith, Inc. v. Erickson, 366 N.W.2d 640, 643-44 (Minn.App. 1985), review denied (Minn. June 24, 1985). The policy provides that any legal action against respondent must be "brought within 2 years after the date on which the direct physical loss or damage occurred." The district court concluded that the policy was ambiguous, reasoning that [t]he problem presented here is a common ambiguity. The problem is the reach of a modifier. In this case, the reach of the modifier "direct physical" is ambiguous. This problem was demonstrated in Richard C. Wydick's text Plain English for Lawyers * * * . The Court will borrow (with slight modifications) his example to demonstrate the ambiguity. For example, a provision of a contract for sale states that the contract covers "all female rabbits and hamsters." This phrase can have two meanings. It can either mean "all female rabbits" and "all female hamsters," or it can mean "all female rabbits and "all hamsters whether male or female."
We cannot conclude the district court erred. Because courts construe ambiguities in insurance contracts in favor of the insured, Hubred v. Control Data Corp., 442 N.W.2d 308, 310 (Minn. 1989), the direct physical loss could have been the damage to the building on January 4, 1997, and the damages could have been business interruption expenses sustained after January 4, 1997. Accordingly, we conclude the district court did not err in finding the time limitation in the policy was ambiguous, and thus the district court's denial of judgment on the pleadings on this issue was proper.
Respondent also argues that even if the policy's time-limitation clause was ambiguous, it was entitled to judgment on the property-damage claim because it is undisputed that appellant's property-damage claim was not brought within two years after the collapse. Again, the district court explained its reasoning as to why appellant's claim was not barred:
The action limitation clause does not state a "claim" is barred if not brought within two years after the date on which the event giving rise to the claim occurred. Instead, an "action" is barred after two years. Although the terms "action" and "claim" are frequently used interchangeably, they are not synonymous. An action is "a judicial proceeding whereby one party prosecutes another for a wrong done, or for protection of a right or prevention of a wrong." Barron's Law Dictionary, 3rd Edition (1991). In contrast, a claim is not a legal proceeding. Instead, a claim is "the assertion of a right to money or property" or "the aggregate of operative facts giving rise to a right enforceable in the courts." Id. A party asserts a claim in an action. * * * The limitation clause applies only to actions. The individual claims that are brought in the action are not separately divided to determine whether each individual claim standing alone was brought within two years.
Courts construe ambiguities in insurance contracts in favor of the insured. Hubred, 442 N.W.2d at 310. Because respondent brought this action within two years of its business interruption damages, we conclude the district court did not err.
Having concluded that appellant's action was not barred under the policy, we need not address appellant's argument that because it filed an action in Nevada state court within two years from the date of the event that caused the damage, its action is "saved" under Minn. Stat. § 541.18 (2000).