Opinion
No. A05-1543.
Filed May 9, 2006.
Appeal from the District Court, Ramsey County, File No. C8-05-1657.
Edward W. Gale, Jr., Thomas C. Atmore, Leonard, O'Brien, Spencer, Gale Sayre, Ltd., (for appellants)
Michael C. Flom, Jennifer J. Olson, Gray, Plant, Mooty, Mooty Bennett, P.A., (for respondent)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2004).
UNPUBLISHED OPINION
On appeal from summary judgment in this lawsuit relating to the construction and installation of a concrete driveway, appellants-homeowners argue that the district court erred in: (a) converting a motion to dismiss for failure to state a claim into a motion for summary judgment; (b) finding no genuine issue of fact as to appellants' breach-of-contract and negligence actions; and (c) dismissing appellants' unjust-enrichment action for failure to state a claim. By notice of review, respondent argues that the district court erred in: (a) concluding that appellants were not precluded from pursuing claims against respondent by virtue of their settlement with their general contractor; and (b) concluding that their general contractor executed a valid assignment with appellants. We affirm in part, reverse in part, and remand.
FACTS
In 2001, appellants Thomas and Karen Lansing were constructing a new home (the residence). Respondent Concrete Design Specialties, Inc. (Custom Rock) submitted a proposal for installing a driveway at the residence to appellants' general contractor Anderson-Sorenson Homes (Anderson-Sorenson). Prior to accepting the proposal, appellants viewed a Custom Rock-installed driveway at a home in Wayzata. According to appellants, the Wayzata driveway had a smooth, untextured surface. Appellants aver that respondent's president told them that they could expect a similar finish on their driveway. Although no party produced a signed copy of the proposal, it is undisputed that appellants and Anderson-Sorenson authorized respondent to install the driveway according to the proposal.
The proposal states that respondent would "pour integrally colored driveway with v-shape grooved control joints and sand blast finish." The bottom left portion of the proposal contains an "Important Notice":
All work installed under this contract is guaranteed to remain free from defects due to faulty workmanship or materials for a period of one year from date of installation. This warranty does not include random concrete cracks caused by ground movement. The finished surface and/or color may reflect variables which are inherent in the methods, materials or creative skills of the installers. Color or texture samples as well as project photographs are intended only to demonstrate typical appearances and cannot be construed to be exact duplicates for an entire project. All work performed under this proposal shall conform to acceptable standards established by the manufacturers of the materials we use or the industry in which we work.
In early fall of 2001, after appellants and Anderson-Sorenson accepted the proposal but before respondent began work, respondent poured a generator pad to illustrate for appellants the intended driveway finish. After reviewing various degrees of sandblasting on the pad, appellants selected the surface they wanted for their driveway.
Respondent poured concrete for the driveway in October 2001. Because construction of the residence was ongoing and the equipment could mar the finished driveway surface, respondent did not sandblast the surface of the driveway until September 2003. According to appellants, the sandblasting did not remove the textured finish, and appellants informed respondent's president that the driveway was unacceptable. Appellants aver that respondent's president stated that he would look into the issue, but never told appellants that respondent had met its obligations under the contract. Respondent sandblasted the driveway again in June 2004, but appellants remained unsatisfied with the appearance.
In January 2004, appellants and Anderson-Sorenson reached a mutual release and settlement agreement following a separate lawsuit over construction costs. The agreement provides that appellants and Anderson-Sorenson "arrived at a mutually agreeable settlement of all claims and potential claims arising out of or related to the Project." Further, each party released and discharged any past, present, or future claims arising from the construction project for themselves, their agents, officers, directors, insurers, etc. In addition, the agreement states that appellants had "assumed full responsibility for and [had] resolved or will resolve the outstanding claims for payment" by various subcontractors. Respondent is listed in the agreement as a subcontractor with an outstanding claim.
Based on issues concerning both the costs charged by respondent and appellants' dissatisfaction with respondent's work, appellants obtained a purported assignment from Anderson-Sorenson in September 2004 that transferred to appellants all of Anderson-Sorenson's contractual rights and claims relevant to respondent.
Appellants served a summons and complaint against respondent in January 2005, alleging that respondent: (1) breached the contract by installing a concrete driveway that did not have a smooth sandblast finish and that was not consistent with the exemplar driveway and the generator pad; (2) negligently installed a concrete driveway with a finish that was not smooth and failed to supervise and monitor the employees who installed the driveway; and (3) was unjustly enriched by receiving partial payment from appellants for a driveway that was not consistent with the exemplar shown or respondent's representations.
Respondent moved to dismiss appellants' complaint for failure to state a claim under Minn. R. Civ. P. 12.02(e). Because the parties submitted extraneous materials to the court for consideration, the district court converted respondent's motion into a motion for summary judgment. The district court granted respondent's motion for summary judgment with respect to appellants' breach-of-contract and negligence claims and dismissed appellants' unjust-enrichment claim. The district court entered judgment on June 29, 2005. This appeal follows.
DECISION I
Appellants first challenge the district court's decision to convert respondent's motion to dismiss for failure to state a claim into a motion for summary judgment, arguing that such a conversion is appropriate only if the district court needed to consider matters outside of the pleadings. The interpretation of the rules of civil procedure presents a question of law subject to de novo review. Barrera v. Muir, 553 N.W.2d 104, 108 (Minn.App. 1996), review denied (Minn. Oct. 29, 1996).
Appellants' argument misinterprets the rules of civil procedure. Minn. R. Civ. P. 12.02 provides that
If, on a motion asserting the defense that the pleading fails to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56.
The rule contains no requirement that the district court weigh the necessity of the additional materials. Here, both parties submitted affidavits and other "matters outside the pleading[s]," such as the mutual-release agreement, and the district court did not exclude any of the exhibits. The district court's decision to treat respondent's motion as one for summary judgment under Minn. R. Civ. P. 56 was proper.
II
Appellants next argue that the district court committed reversible error in granting summary judgment on appellants' breach-of-contract claim because the district court ruled on the "ultimate fact issue" in this case — whether respondent had performed under the contract — when the issue of respondent's performance was neither raised by the motion nor ripe for decision.
In an appeal from summary judgment, this court reviews two determinations: whether a genuine issue of material fact exists, and whether an error in the application of law occurred. Offerdahl v. Univ. of Minn. Hosps. Clinics, 426 N.W.2d 425, 427 (Minn. 1998). This court reviews the evidence in the light most favorable to the non-moving party without deferring to the district court's application of the law. Id.
When a dismissal motion becomes a summary-judgment motion by virtue of the submission of extrinsic materials, a district court must give all parties a "reasonable opportunity to present all material made pertinent to such a motion." Minn. R. Civ. P. 12.02; see Erickson v. County of Clay, 451 N.W.2d 666, 669 (Minn.App. 1990) (refusing to hold parties to the summary-judgment standard on review of motion to dismiss because the record did not reflect whether the parties were given reasonable opportunity to present all relevant materials).
The record reflects that the district court gave appellants sufficient reasonable opportunity to respond. In its memorandum supporting its motion to dismiss, respondent argued that appellants' breach-of-contract claims based on the surface finish texture of the driveway were disclaimed under the contract. The district court agreed with respondent, concluding that the contractual language contained in the disclaimer recognized potential imperfections with the driveway's finish:
[Appellants] however, fail to illustrate through affidavit, argument, or other submission any evidence that would lead this Court to believe that issues exist in regard to the quality of [respondent's] final product, the pour and surface of the concrete work, which may not fall under the above-referenced "inherent imperfections" provision and are more akin to faulty workmanship, or generally, of a quality below acceptable standards within the industry.
Thus, the district court assumed for purposes of summary judgment that appellants' complaints regarding the finished surface of their driveway accurately reflect the condition of the driveway, but determined as a matter of law that these complaints were not actionable under the contract. Accordingly, appellants' contention that the district court decided a fact issue regarding the driveway surface mischaracterizes the district court's conclusion.
We conclude, however, that the district court erred in holding that appellants failed to allege defects in the driveway surface that fell outside this "inherent imperfections" provision. Unless contractual language is ambiguous, the construction and effect of contract language is a question of law. Hydra-Mac, Inc. v. Onan Corp., 450 N.W.2d 913, 916-17 (Minn. 1990). When interpreting a contract, courts give the language its plain and ordinary meaning. Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 67 (Minn. 1979).
The relevant contractual language is the disclaimer provision which provides, in pertinent part, that "[t]he finished surface and/or color may reflect variables which are inherent in the methods, materials or creative skills of the installers."
A "variable" is defined as something that deviates from the normal or recognized type. See The American Heritage Dictionary of the English Language 1975 (3d ed. 1992). Assuming appellants' asserted facts as true, the entire finished surface does not conform to what respondent promised and differs in texture from the generator pad respondent poured to use as a model for appellants' driveway. According to appellants, there is no smooth surface, or no normal type, from which portions of respondent's work deviated. Thus, the defects appellants allege fall outside the scope of "inherent imperfections" in the finished surface.
Because respondent did not submit any evidence to contradict appellants' description of the finished driveway surface, appellants' description creates a genuine issue of material fact as to whether the contract disclaimed respondent's performance. Given the limited factual evidence regarding the finished surface of the driveway, appellants' description of respondent's attempts to correct the driveway surface, and the undisputed fact that respondent was able to pour a generator pad that conformed to appellants' expectations, to hold otherwise would allow respondent to disclaim liability for potentially faulty workmanship that may not be inherent in the materials, method, or "creative skills of the installer." Accordingly, we reverse the award of summary judgment on appellants' breach-of-contract claim and remand for further proceedings.
III
Appellants next challenge the district court's award of summary judgment with respect to appellants' negligence claim, arguing that the district court committed reversible error by exceeding the scope of respondent's motion to dismiss and concluding that appellants failed to raise a genuine issue of material fact with respect to respondent's conduct.
The record reflects that respondent limited its argument supporting its motion to dismiss appellants' negligence claim to alleged deficiencies in the complaint. Thus, the record supports appellants' argument that it was not afforded the requisite reasonable opportunity to respond under Minn. R. Civ. P. 12.02. It was therefore inappropriate for the district court to hold appellants to the summary-judgment standard. But, following Erickson v. County of Clay, 451 N.W.2d 666, 669 (Minn.App. 1990), the appropriate remedy is not an outright reversal, but an examination of the claim within the narrow parameters of Minn. R. Civ. P. 12.02(e) (failure to state a claim). See Erickson, 451 N.W.2d at 670 (examining whether Erickson's complaint failed as a matter of law because it did not state any cause of action).
In reviewing a complaint that is dismissed for failure to state a claim on which relief can be granted, this court determines only whether the complaint sets forth a legally sufficient claim for relief. Minn. R. Civ. P. 12.02(e); Barton v. Moore, 558 N.W.2d 746, 749 (Minn. 1997). This court accepts the facts alleged in the complaint as true and makes all reasonable inferences in favor of the nonmoving party. The issue here is whether the allegations in appellants' complaint are sufficient to set forth a legally cognizable negligence claim. The elements of negligence are: (1) the existence of a duty of care; (2) breach of that duty; (3) injury; and (4) that the breach of the duty was the proximate cause of the injury. Louis v. Louis, 636 N.W.2d 314, 318 (Minn. 2001).
Appellants' negligence claim fails as a matter of law because appellants cannot demonstrate a duty independent of the duty established by contract. See D A Dev. Co. v. Butler, 357 N.W.2d 156, 158 (Minn.App. 1984) ("To prevail in negligence, a plaintiff must prove as one element that the defendant breached `some duty imposed by law, not merely one imposed by contract.'" (quoting Keiper v. Anderson, 138 Minn. 392, 398, 165 N.W. 237, 238 (1917))); see also Lampert Lumber Co. v. Joyce, 405 N.W.2d 423, 424 (Minn. 1987) (noting that Minnesota does not recognize a cause of action for negligent breach of contract). The duty that respondent owed to appellants to install the driveway using proper workmanship to obtain the desired surface does not exist outside of the contract. Consequently, appellants failed to state a claim for negligence as a matter of law.
Therefore, although the district court improperly applied the summary-judgment standard, because the negligence claim fails to state a cognizable claim for relief under Minn. R. Civ. P. 12.02(e), the district court did not err in dismissing the claim. See Minn. R. Civ. P. 61 (requiring harmless error to be disregarded).
IV
Appellants next challenge the district court's dismissal of their claim for unjust enrichment, arguing that unjust enrichment is an alternate theory of recovery that should not be dismissed prior to discovery. Appellants' argument lacks merit. "[E]quitable relief cannot be granted where the rights of the parties are governed by a valid contract." United States Fire Ins. Co. v. Minn. State Zoological Bd., 307 N.W.2d 490, 497 (Minn. 1981). Except in very limited situations, when a valid contract governs the relationship between the parties, the doctrine of unjust enrichment has no application. See Midwest Sports Mktg., Inc. v. Hillerich Bradsby of Canada, Ltd., 552 N.W.2d 254, 268 (Minn.App. 1996) (holding that a party is not entitled to equitable relief or unjust enrichment when the party's rights are governed by a valid contract, unless the contract is not a full agreement of all details of compensation), review denied (Minn. Sept. 20, 1996). Because appellants' complaint makes no allegation that the contract lacked specific terms of compensation, the district court did not err in dismissing appellants' unjust-enrichment claim.
V
Respondent argues that the district court erred in concluding that the settlement agreement between appellants and Anderson-Sorenson did not preclude appellants' claims against respondent because (a) the agreement released subcontractors from all liability, and (b) respondent was an agent of Anderson-Sorenson and, therefore, specifically released from liability. We disagree. An examination of the settlement agreement demonstrates that subcontractors are not included within the list of protected and/or precluded classifications along with agents, officers, insurers, etc. The plain meaning of the contract is that Anderson-Sorenson and appellants did not intend to shield subcontractors from liability. Further, there is no evidence in the record that Anderson-Sorenson manifested that respondent either acted on its behalf, or was subject to its control. See Restatement (Second) of Agency, § 1 (1958); see also Norby v. Bankers Life Co. of Des Moines, 304 Minn. 464, 470, 231 N.W.2d 665, 669 (1975). The district court's conclusion is not erroneous.
VI
Respondent also challenges the district court's conclusion that Anderson-Sorenson assigned its contractual rights and claims to appellants, arguing that the assignment is invalid for lack of consideration. Respondent's argument fails as a matter of law. "Under Minnesota law, no particular form of words is required for an assignment, but the assignor must manifest an intent to transfer and must not retain any control or any power of revocation." Minnesota Mut. Life Ins. Co. v. Anderson, 504 N.W.2d 284, 286 (Minn.App. 1993) (citing Guaranty State Bank of St. Paul v. Lindquist, 304 N.W.2d 278, 280-81 (Minn. 1980)), review denied (Minn. Oct. 19, 1993). Assignments may be gratuitous or for value. Id. The Restatement (Second) of Contracts § 332 (1981) provides that a gratuitous assignment is irrevocable if "the assignment is in a writing either signed or under seal that is delivered by the assignor." Here, the record reflects that the assignment is in writing, signed by Anderson-Sorenson, and in appellants' possession. Respondent alleges no fault with delivery. Accordingly, the assignment is not invalid for want of consideration because it satisfies Minnesota's requirements for execution.