Commonwealth Land Title Insurance Company v. Historic Ivy Tower, LLC ( 2014 )

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2012).
STATE OF MINNESOTA
IN COURT OF APPEALS
A13-1621
Commonwealth Land Title Insurance Company,
Respondent,
vs.
Historic Ivy Tower, LLC, et al.,
Appellants.
Filed August 4, 2014
Affirmed in part, reversed in part, and remanded
Schellhas, Judge
Hennepin County District Court
File No. 27-CV-11-3713
Brian M. Sund, Ryan R. Dreyer, Eric G. Nasstrom, Stacy L. Kabele, Jeffrey R. Underhill,
Morrison Sund PLLC, Minnetonka, Minnesota (for respondent)
David F. Herr, Emma Greenman, Maslon Edelman Borman & Brand, LLP, Minneapolis,
Minnesota; and
Stephen J. Foley, Thomas W. Pahl, Aaron M. Ninnemann, Foley & Mansfield, PLLP,
Minneapolis, Minnesota (for appellants)
Considered and decided by Schellhas, Presiding Judge; Halbrooks, Judge; and
Toussaint, Judge.*
*
Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to
Minn. Const. art. VI, § 10.
UNPUBLISHED OPINION
SCHELLHAS, Judge
Appellants argue that the district court erred by (1) granting respondent summary
judgment on its breach-of-indemnity claim, (2) denying appellants’ motion to dismiss
respondent’s fraud claim with prejudice, and (3) denying appellants’ request for
apportionment of damages based on two indemnity agreements. On cross-appeal,
respondent argues that the district court miscalculated prejudgment interest. We affirm in
part, reverse in part, and remand for a recalculation of prejudgment interest.
FACTS
This dispute arises out of the development of a 136-room hotel (Ivy Tower hotel)
and 92 residential condominiums (Ivy Tower residence) in Minneapolis (collectively Ivy
project). Appellant Jeffrey Laux was the chief manager of appellants Historic Ivy Tower
LLC; Ivy Tower Holdings LLC; Ivy Tower Garage LLC; Historic Ivy Hotel LLC; Ivy
Tower Development LLC; and Ivy Tower Minneapolis LLC (Ivy entities). In December
2005, respondent Commonwealth Land Title Insurance Company closed construction
loans totaling about $69,000,000 to Ivy Tower Development, Ivy Tower Minneapolis,
and Ivy Tower Holdings from Dougherty Funding LLC. Commonwealth issued a policy
of title insurance to Dougherty, and Ivy Tower Development agreed to indemnify
Commonwealth against loss arising from mechanics’ liens or claims in connection with
work done or alleged to be done or materials provided or alleged to be provided to the
Ivy project. Ivy Tower Development did “not indemnify for any of the above caused by
the intentional or negligent acts or omissions of Commonwealth.” Commonwealth agreed
2
to act as the disbursing agent for Dougherty and signed two disbursing agreements—one
with Ivy Tower Holding and Dougherty for the Ivy Tower hotel and one with Ivy Tower
Minneapolis and Dougherty for the Ivy Tower residence.
In 2008, Commonwealth issued four additional title policies, insuring Dougherty
against loss or damage incurred because of “[t]he lack of priority of the lien of the
Insured Mortgage upon the Title” for listed reasons. Appellants Gary Benson, Laux, and
Ivy entities (Ivy parties) gave Commonwealth an indemnity bond in connection with title
policies in which Commonwealth insured loan amounts of $38,195,000 and $30,830,000
“plus any additional amounts of owner’s and loan policies issued by [Commonwealth], as
to condominium units.” The 2008 indemnity bond covered Commonwealth’s expenses
incurred by reason of the omission or deletion of 11 mechanics’ liens that totaled more
than $2,500,000 million and “any lien, or right to a lien, for services, labor or material
heretofore or hereafter furnished imposed by law.”
In 2010, Commonwealth sued Ivy parties for breach of the 2005 indemnification
agreement and the 2008 indemnification bond, and for fraud, among other things. In
response, Ivy parties affirmatively alleged that Commonwealth’s alleged damages were
caused by the negligence of it or other parties and counterclaimed that Commonwealth
negligently “advance[ed] funds without performing its duties and obligations under the
Disbursing Agreements,” thereby breaching its duty “in administering the funding of the
disbursements of the loan and insuring title to the Property.” The district court appointed
a special master to resolve discovery disputes and hear non-dispositive motions; set
November 15, 2011, as a deadline for discovery, subsequently extended to January 15,
3
2012; set December 15, 2011, as a deadline for dispositive and non-dispositive motions
with a hearing deadline of January 16, 2012, subsequently extended to January 16, 2012,
and February 15, 2012, respectively; and set May 7, 2012, as a trial date, subsequently
extended to a range of dates between February 12, 2013, and March 1, 2013.
In March 2012, both Commonwealth and Ivy parties moved for partial summary
judgment. Commonwealth sought (1) judgment on Ivy parties’ liability for breach of the
2005 indemnity agreement and the 2008 indemnity bond and (2) dismissal of Ivy parties’
counterclaims, intending to try the issue of damages and its fraud claim. Ivy parties
opposed Commonwealth’s motion, arguing that the 2008 indemnity bond was ambiguous
and bound Laux and Benson to pay “only a pro-rata share of the condominiums that were
actually closed, and not on the entire project itself.” Ivy parties moved for dismissal of
Commonwealth’s fraud claim.1
1
By apparent agreement of the parties, the special master heard the parties’ dispositive
motions and denied Commonwealth summary judgment on its breach-of-indemnity
claim, granted Commonwealth summary judgment on Ivy parties’ counterclaims, and
denied Ivy parties summary judgment on Commonwealth’s fraud claim. The parties
moved the district court to modify the special master’s order. Commonwealth argued, as
to its breach-of-indemnity claim, that no genuine issue of material fact existed about
whether its negligence precluded indemnification from Ivy parties, and that Minnesota
does not recognize a cause of action for negligent breach of contract. Ivy parties
affirmatively alleged negligence by Commonwealth regarding Commonwealth’s duties
that allegedly were independent of the disbursing agreements. Ivy parties objected to the
special master’s dismissal of some of their counterclaims and refusal to dismiss
Commonwealth’s fraud claim. Ivy parties’ argued that Commonwealth breached its duty
as an escrow holder under the disbursing agreements and breached its duty as a title
insurer “to obtain a subordination (but not waiver) of any mechanic’s liens by Bor-Son
and all then-known future subcontractors to the lien of the Dougherty mortgage” when it
knew of “a substantial likelihood for a priority argument.” Commonwealth objected to
Ivy parties’ newly raised negligence theories. Ivy parties responded that Commonwealth
was under a duty “that the law imposes anywhere on any actor . . . . It’s either a
4
The district court granted Commonwealth summary judgment on its breach-of-
indemnity claim, concluding that Ivy parties breached the 2008 indemnity bond by failing
to indemnify Commonwealth or satisfy the mechanics’ liens; dismissed Ivy parties’
counterclaims; denied Ivy parties’ partial-summary-judgment motion, rejecting their
argument that the 2008 indemnity bond was ambiguous; declined to consider Ivy parties’
newly raised negligence theories; and denied Ivy parties’ motion to dismiss
Commonwealth’s fraud claim, reserving for trial the issue of damages on the breach-of-
indemnity claim and Commonwealth’s fraud claim.
On February 25, 2013, before the commencement of trial, subject to their
arguments that the district court previously rejected, Ivy parties conceded that
Commonwealth’s breach-of-indemnity damages were $6,334,576.79, and
Commonwealth agreed that it would pursue its fraud claim against only Benson. Ivy
parties moved to dismiss the fraud claim with prejudice under the election-of-remedies
doctrine. Commonwealth objected, arguing that if the court dismissed the fraud claim
with prejudice and an appellate court remanded the judgment on its breach-of-indemnity
claim, Commonwealth would be unable to prove separate damages for each claim.
Commonwealth proposed that the court direct entry of judgment in the amount of
$6,334,576.79 under Minn. R. Civ. P. 54.02 and hold the fraud claim against Benson “in
abeyance.” Commonwealth’s counsel stated, “Just to be clear, so there is no funny stuff
here, on the record, I will be bringing a Motion to Dismiss Without Prejudice [the fraud
contractual duty or if the contract imposes duty but it doesn’t define how, when, or
where, then the law imposes an implied covenant to act in good faith and to deal fairly.”
5
claim] in the future.” And Ivy parties replied, “That’s fine.” The court agreed to hold the
fraud claim against Benson in abeyance, denied Ivy parties’ request to reopen the record
to hear their motion, and ordered entry of judgment in the amount of $6,334,576.79
against Ivy parties jointly and severally. The district court administrator entered judgment
on April 4.2
Commonwealth moved to amend the judgment to include prejudgment interest in
the amount of $2,163,068.16, accruing from July 13, 2009, when Commonwealth
claimed to have provided Ivy parties written notice of its claim. Over Ivy parties’
objection, the district court awarded Commonwealth $593,263 in prejudgment interest,
applying “the [common-law] ascertainability rule.” Upon Commonwealth’s request, the
district court subsequently dismissed Commonwealth’s fraud claim against Benson
without prejudice, and the district court administrator entered judgment on August 12,
2013.
This appeal and cross-appeal follow.
DECISION
I. The district court did not err by granting Commonwealth summary
judgment on its breach-of-indemnity claim.
Appellate courts “review de novo a district court’s grant of summary judgment.
We view the evidence in the light most favorable to the party against whom summary
judgment was granted to determine whether there are any genuine issues of material fact
2
On May 24, 2013, Ivy parties noticed an appeal from the April 4, 2013 judgment, but
this court dismissed the appeal because Commonwealth’s motion to amend the judgment
to include prejudgment interest was pending.
6
and whether the district court correctly applied the law.” Dukowitz v. Hannon Sec. Servs.,
841 N.W.2d 147, 150 (Minn. 2014). “The moving party has the burden of showing an
absence of factual issues before summary judgment can be granted.” Anderson v. State,
Dep’t of Natural Res., 693 N.W.2d 181, 191 (Minn. 2005).
The 2005 indemnity agreement relieved Ivy Tower Development of its duty to
indemnify Commonwealth for specified expenses incurred by Commonwealth due to its
“intentional or negligent acts or omissions.” In answering Commonwealth’s complaint,
Ivy parties asserted affirmative defenses and counterclaims. They claimed that
Commonwealth negligently “advance[d] funds without performing its duties and
obligations under the Disbursing Agreements,” thereby breaching its duty “in
administering the funding of the disbursements of the loan and insuring title to the
Property.” (Emphasis added.) Ivy parties are precluded from recovering on that basis
because “negligent breach of contract[ is] a cause of action not recognized in this state.”
Lampert Lumber Co. v. Joyce, 405 N.W.2d 423, 424 (Minn. 1987) (citing Lesmeister v.
Dilly, 330 N.W.2d 95, 102 (Minn. 1983)); see also Glorvigen v. Cirrus Design Corp.,
816 N.W.2d 572, 584 (Minn. 2012) (“[W]hen a contract provides the only source of
duties between the parties, Minnesota law does not permit the breach of those duties to
support a cause of action in negligence.” (quotation omitted) (citing Lesmeister, 330
N.W.2d at 102)); Wild v. Rarig, 302 Minn. 419, 440, 234 N.W.2d 775, 789 (1975)
(“[W]hen a plaintiff seeks to recover damages for an alleged breach of contract he is
limited to damages flowing only from such breach except in exceptional cases where the
defendant’s breach of contract constitutes or is accompanied by an independent tort.”).
7
Ivy parties invite this court to construe their negligence affirmative defense to
include a claim that Commonwealth breached duties “imposed by standard practices in
the title insurance industry.” They argue that the district court erred by granting
Commonwealth summary judgment on its breach-of-indemnity claim because genuine
issues of material fact exist as to whether Commonwealth engaged in “negligent
underwriting” and, if so, whether that negligence precludes Commonwealth from
recovering from Ivy parties. We decline Ivy parties’ invitation.
“Minnesota is a notice-pleading state that does not require absolute specificity in
pleading, but rather requires only information sufficient to fairly notify the opposing
party of the claim against it.” Hansen v. Robert Half Int’l, Inc., 813 N.W.2d 906, 917–18
(Minn. 2012); see also Home Ins. Co. v. Nat’l Union Fire Ins. of Pittsburgh, 658 N.W.2d
522, 535 (Minn. 2003) (“[C]ourts are to construe pleadings liberally.”). Parties need not
specially plead “specific acts of negligence,” Lines v. Ryan, 272 N.W.2d 896, 901 n.3
(Minn. 1978), and “the word ‘negligently’ . . . is generally sufficient, without stating the
particular circumstances or details which go to make up the negligence complained of,”
Rogers v. Truesdale, 57 Minn. 126, 128, 58 N.W. 688, 689 (1894). See also Goeb v.
Tharaldson, 615 N.W.2d 800, 818 (Minn. 2000) (“[T]he pleading of broad, general
statements that may be conclusory is permitted, and pleadings need not allege facts to
support every element of a cause of action.”). But, “where a pleading alleges negligence
in general terms, followed by specifications as to what the negligence consists of, the
specifications control over the general allegation.” Baufield v. Warburton, 181 Minn.
506, 507, 233 N.W. 237, 238 (1930).
8
The district court “is required to base relief on issues either raised by the pleadings
or litigated by consent” because “[i]t is fundamental that a party must have notice of a
claim against him and an opportunity to oppose it before a binding adverse judgment may
be rendered.” Folk v. Home Mut. Ins. Co., 336 N.W.2d 265, 267 (Minn. 1983). Here, Ivy
parties neither pleaded that Commonwealth engaged in “negligent underwriting” nor
pleaded that Commonwealth committed negligence based on duties arising independent
of the disbursing agreements. And Ivy parties limited their negligence counterclaim to
breach of duties arising from the disbursing agreements, pleading that “Commonwealth
breached its duty of care by advancing funds without performing its duties and
obligations under the Disbursing Agreements.” (Emphasis added.) In their answer, Ivy
parties denied liability under the 2008 indemnity bond for reasons including their
“counterclaims.” They argue on appeal that the district court erred by dismissing their
“Counterclaim for Negligence,” also arguing that the district court was obligated to
provide them a trial on the issue of Commonwealth’s negligence. We construe Ivy
parties’ negligence affirmative defense in light of their negligence counterclaim because
they premised their defense and counterclaim on the same theory. Cf. Minn. R. Civ. P.
8.03 (“When a party has mistakenly designated a defense as a counterclaim or a
counterclaim as a defense, the court, on such terms as justice may require, shall treat the
pleading as if there had been a proper designation.”); Hardin Cnty. Sav. Bank v. Hous. &
Redevelopment Auth., 821 N.W.2d 184, 192 (Minn. 2012) (“Our obligation is to review
the complaint as a whole . . . .” (quotation omitted)).
9
Before objecting to the special master’s order on August 29, 2012,3 Ivy parties
never provided the district court or Commonwealth notice of their claim of negligence
based on duties arising independent of the disbursing agreements. Notably, in their
memorandum opposing Commonwealth’s summary-judgment motion before the special
master, Ivy parties argued that “Commonwealth’s Breach of the Disbursing Agreements
Precludes its Claim Under the Indemnity Agreement and Indemnity Bond.”
Minnesota Rule of Civil Procedure 15.01 permitted Ivy parties to amend their
pleadings by leave of court. “[A] party that ‘fails to take advantage of this
procedure . . . is bound by the pleadings unless the other issues are litigated by consent.’”
Rios v. Jennie-O Turkey Store, Inc., 793 N.W.2d 309, 317 (Minn. App. 2011) (quoting
Roberge v. Cambridge Co-op. Creamery Co., 243 Minn. 230, 234, 67 N.W.2d 400, 403
(1954)). Here, the parties did not litigate Ivy parties’ new theories by consent. We
conclude that the district court did not err by declining to consider Ivy parties’ new
negligence theories and therefore affirm the court’s grant of summary judgment to
Commonwealth on its breach-of-indemnity claim.
3
This date was more than seven months after the January 16, 2012 deadline for
dispositive motions and more than six months after the February 15, 2012 hearing
deadline for those motions.
10
II. Ivy parties waived any challenge to the district court’s February 25, 2013
denial of their motion to dismiss Commonwealth’s fraud claim against
Benson with prejudice by not objecting to the district court’s July 2013
dismissal of the claim without prejudice.
Ivy parties argue that the district court erred by denying their oral motion on
February 25, 2013, to dismiss Commonwealth’s fraud claim against Benson with
prejudice. Commonwealth argues that Ivy parties waived this argument.
On July 9, 2013, Commonwealth sent the district court a letter in response to what
it described as the district court’s suggestion that the parties stipulate to “what happened
between them [on the record on February 25, 2013,] that was read into the record,”
stating,
In an attempt to alleviate any disagreement between
[counsel for Ivy parties] and myself as to what was stipulated
to and, more importantly, so as to completely eliminate any
grounds for the appellate court to reject the ripeness of the
appeal at this time, Commonwealth has authorized me to
dismiss its fraud claim without prejudice. Accordingly, if the
Court is so inclined, Commonwealth requests that the Court
dismiss the fraud claim altogether without prejudice to
eliminate any jurisdiction issues over pending claims that
troubled the appellate court.
. . . . I have attached a proposed order for the Court to sign.
(Emphasis added.) On July 10, Ivy parties sent the court an e-mail, stating, “Please be
advised that we have received [Commonwealth]’s letter of July 9, 2013 requesting the
Court dismiss the remaining fraud claim against Mr. Benson without prejudice. We have
no objection to this request, and no objection to the proposed order submitted by
[Commonwealth].” (Emphasis added.) The district court then dismissed the fraud claim
against Benson without prejudice.
11
Voluntary-dismissal motions are governed by Minn. R. Civ. P. 41, and, generally,
“[t]his court will not reverse a district court’s decision on a rule 41 motion unless the
district court abuses its discretion.” Butts ex rel. Iverson v. Evangelical Lutheran Good
Samaritan Soc’y, 802 N.W.2d 839, 841 (Minn. App. 2011), review denied (Minn.
Oct. 26, 2011). The district court may dismiss a plaintiff’s claim under rule 41.01(b)
“upon order of the court and upon such terms and conditions as the court deems proper.”
When Ivy parties expressed no objection to Commonwealth’s July 2013 request
for dismissal of its fraud claim against Benson without prejudice, they acquiesced to the
district court losing its jurisdiction to enter judgment on the merits of the fraud claim
because “voluntary dismissal . . . ends the case and ousts the court of jurisdiction
thereafter to enter judgment on the merits.” Application of Mitchell, 216 Minn. 368, 376,
13 N.W.2d 20, 25 (1944); cf. DeMars v. Robinson King Floors, Inc., 256 N.W.2d 501,
506 (Minn. 1977) (referring to “the court of appeals [as] los[ing] jurisdiction by virtue of
a voluntary dismissal”).
We conclude that Ivy parties waived any challenge to the district court’s
February 25, 2013 denial of their request to dismiss the fraud claim against Benson with
prejudice by not objecting to the court’s July 2013 dismissal of the claim without
prejudice.
12
III. The district court did not abuse its discretion by declining to consider Ivy
parties’ trigger-and-allocation argument and by denying Ivy parties’
request to present trigger-and-allocation evidence and argument to the
jury.
“The court has broad discretion to impose deadlines to manage its calendar.”
TC/Am. Monorail, Inc. v. Custom Conveyor Corp., 840 N.W.2d 414, 418 (Minn. 2013).
In this case, the district court set January 16, 2012, as the deadline for dispositive- and
non-dispositive motions and ordered that such motions be heard by February 15, 2012.
When opposing Commonwealth’s summary-judgment motion on its breach-of-
indemnity claim, Ivy parties argued that the 2008 indemnity bond was ambiguous and
that Laux’s and Benson’s indemnity liability was limited to “a pro-rata share of the
condominiums that were actually closed, and not on the entire project itself.” The district
court rejected their arguments. In a trial memorandum filed on February 22, 2013, three
days before trial, Ivy parties argued, for the first time, that only Ivy Tower Development
was liable to pay indemnity damages because only coverage under the 2006 title-
insurance policy was triggered and, even if coverage under the 2008 title-insurance
policies was triggered, “all losses must be allocated pro-rata” (trigger-and-allocation
argument).
On February 25, 2013, when the parties appeared for trial and Commonwealth
agreed that it would pursue its fraud claim only against Benson, Ivy parties, on the basis
of their trigger-and-allocation argument, moved to dismiss Commonwealth’s damage
claim as a matter of law against all Ivy parties except Ivy Tower Development.
Alternatively, Ivy parties requested that the district court permit them to argue at trial that
13
the events triggering coverage under the polices were continuous and for the court to
allocate indemnification liability after trial. Commonwealth objected on the bases that Ivy
parties did not plead or previously raise their trigger-and-allocation theory as an
affirmative defense. Ivy parties maintained that “[t]here is no affirmative disclosure
requirement under the Minnesota Rules of Civil Procedure. They didn’t ask me. I don’t
have to tell them,” and contended that they pleaded the argument by denying that they
owed Commonwealth any money. The district court declined to address the merits of Ivy
parties’ trigger-and-allocation argument, stating, “This issue has never been raised
before. . . . There is no motion pending before the Court. There was no motion noticed.
There was no motion—no affidavit submitted with these documents. It was not properly
before the Court, even though I listened to it all morning.”
Before Commonwealth submitted its proposed order to the district court, Ivy
parties submitted affidavits and a memorandum to the court, noting that they “object[ed]
to the proposed damage amounts adjudged against them because Commonwealth has not
proven any facts that would as a matter of law establish the entire amount of the incurred
loss is chargeable solely to the 2008 policies.” They also argued that “there cannot be
‘joint and several’ liability of each Indemnitor, as only Ivy Tower is contractually
obligated to indemnify losses under the 2006 Policy.” By letter, they asked the court to
reopen the record to consider their evidence and memorandum and to “direct the parties
to file cross-motions for summary judgment on the issues of trigger and allocation.”
Commonwealth submitted its proposed order, which provided for the entry of judgment
in the amount of $6,334,576.79 against Ivy parties jointly and severally, and asked the
14
court to strike Ivy parties’ memorandum and an exhibit attached to one of their
supporting affidavits, noting that the trial record closed on February 25, 2013.
The district court denied Ivy parties’ trigger-and-allocation requests as untimely.
The court reasoned that extensive discovery occurred; the parties filed multiple motions,
including summary-judgment motions; the dispositive-motions deadline was January 16,
2012, to be heard no later than February 15, 2012; Ivy parties filed their trigger-and-
allocation memorandum on February 22, 2013, after receiving a four-month continuance;
and Commonwealth lacked notice of the issue because Ivy parties did not plead it or
mention it in their interrogatory answers.
Ivy parties argue that the district court erred by denying their trigger-and-
allocation requests and ordering that Ivy parties are jointly and severally liable on the
judgment in favor of Commonwealth. Ivy parties argue as follows:
To properly allocate damages between the 2005 Indemnity
Agreement indemnified by [Ivy Tower Development], and
the 2008 Indemnity Bond indemnified by the Ivy Parties, the
district court should have determined which of
Commonwealth’s title insurance policies was triggered by the
mechanic’s lien claims. If and only then could the district
court properly determine which indemnity agreement, if any,
was obligated to cover Commonwealth’s losses.
They also argue that the court’s February 25 ruling “improperly denied the Ivy Parties the
opportunity to proceed to trial on issues of Commonwealth’s alleged breach of contract
damages under either the 2005 Indemnity Agreement or 2008 Indemnity Bond.” We are
not persuaded.
15
Appellate courts review for an abuse of discretion a district court’s “evidentiary
rulings.” Doe v. Archdiocese of St. Paul, 817 N.W.2d 150, 164 (Minn. 2012). “Questions
of law are generally not to be decided by a jury,” Jerry’s Enters., Inc. v. Larkin, Hoffman,
Daly & Lindgren, Ltd., 711 N.W.2d 811, 820 (Minn. 2006), and the district court errs by
submitting a legal question to a jury, see, e.g., Glorvigen, 816 N.W.2d at 582 (“[W]hether
there exists a duty is a legal issue for court resolution. If no duty exists, it is error for the
district court to submit the negligence claim to the jury.” (quotation omitted)). “[T]he
timing of an underlying plaintiff’s injury is a question of fact.” In re Silicone Implant Ins.
Coverage Litig., 667 N.W.2d 405, 415 (Minn. 2003). But “[t]he interpretation of an
insurance policy, including the question of whether a legal duty to defend or indemnify
arises, is one of law.” Midwest Family Mut. Ins. Co. v. Wolters, 831 N.W.2d 628, 636
(Minn. 2013) (quotation omitted).
We note that Ivy parties’ reliance on the 2005 indemnity agreement and 2006 title
policy directly contradicts the statement in their answer that “the Indemnification
Agreement signed prior to 2008 is null and void” and the 2006 policy “was rendered null
and void in October 2008, and is no longer of any force or effect.” (Emphasis added.)
Regardless, the damages issue that the district court reserved for trial was limited to Ivy
parties’ indemnity obligation under the 2008 indemnity bond, not the 2005 indemnity
agreement. The district court granted summary judgment to Commonwealth on its
breach-of-indemnity claim because Ivy parties “breached the 2008 Bond” by “not
satisfy[ing] the mechanics’ liens or indemnify[ing] [Commonwealth] for any of its losses
incurred as a result of defending against the mechanics’ liens on the project.”
16
We conclude that the district court acted within its discretion by denying Ivy
parties’ trigger-and-allocation motion made on the eve of trial and in violation of Minn.
Gen. R. Prac. 115.03(a)–(b). See Maudsley v. Pederson, 676 N.W.2d 8, 12 (Minn. App.
2004) (“[W]hether or not to enforce its own scheduling order is clearly within the district
court’s discretion.”); see also Rhee v. Golden Home Builders, Inc., 617 N.W.2d 618, 621
(Minn. App. 2000) (“Rhees were unfairly prejudiced by the court’s failure to enforce the
[general] rules [of practice] under these circumstances.”). We further conclude that the
district court did not abuse its discretion by declining to permit Ivy parties to present
arguments as to that issue to the jury.
IV. The district court erred by applying the common-law readily
ascertainable rule to determine the accrual dates of Commonwealth’s
prejudgment interest instead of applying Minn. Stat. § 549.09, subd. 1(b)
(2012), the prejudgment-interest statute.
When Commonwealth moved to amend the judgment to include prejudgment
interest in the amount of $2,163,068.16, accruing from July 13, 2009, the date on which
Commonwealth claimed to have provided Ivy parties written notice of its claim, Ivy
parties objected, arguing that “Commonwealth fail[ed] to prove when its alleged damages
actually accrued.” The district court did not accept July 13, 2009, as the interest-accrual
date. Applying the common-law ascertainability rule, the court selected various interest-
accrual dates to calculate interest and awarded Commonwealth $593,263 in prejudgment
interest. Commonwealth argues that the district court erred by applying the common-law
ascertainability rule. The availability of prejudgment interest is a legal issue that we
review de novo.” Duxbury v. Spex Feeds, Inc., 681 N.W.2d 380, 390 (Minn. App. 2004),
17
review denied (Minn. Aug. 25, 2004); see also White v. City of Elk River, 840 N.W.2d 43,
52 (Minn. 2013) (“Statutory interpretation presents a question of law, which we review
de novo.”).
Minnesota statutes section 549.09, subdivision 1(b), includes no readily
ascertainable requirement. The statute provides that, generally, “[e]xcept as otherwise
provided by contract or allowed by law, preverdict, preaward, or prereport interest on
pecuniary damages shall be computed as provided in paragraph (c) from the time of the
commencement of the action or a demand for arbitration, or the time of a written notice
of claim, whichever occurs first.”
Before the 1984 amendment of section 549.09 “[a]
plaintiff [was] entitled to prejudgment interest on a final
judgment where the damages claim [was] liquidated, or, if
unliquidated, where the damages were readily ascertainable
by computation or reference to generally recognized
standards such as market value and not where the amount of
damages depended upon contingencies or upon jury
discretion (as in actions for personal injury or injury to
reputation).”
Skifstrom v. City of Coon Rapids, 524 N.W.2d 294, 296 (Minn. App. 1994) (quoting
Summit Court, Inc. v. N. States Power, 354 N.W.2d 13, 16 (Minn. 1984) (other quotation
omitted)), review dismissed (Minn. Oct. 25, 1995). “In 1984, . . . section 549.09 was
amended to allow pre-verdict interest irrespective of a defendant’s ability to ascertain the
amount of damages for which he might be held liable.” Lienhard v. State, 431 N.W.2d
861, 865 (Minn. 1988); see Skifstrom, 524 N.W.2d at 296–97 (following Lienhard); see
also Myers v. Hearth Techs., Inc., 621 N.W.2d 787, 794 (Minn. App. 2001) (following
Lienhard and Skifstrom), review denied (Minn. Mar. 13, 2001); Cox v. Crown CoCo, Inc.,
18
544 N.W.2d 490, 500–01 (Minn. App. 1996) (same). And the supreme court clearly
stated in Schwickert, Inc. v. Winnebago Seniors, Ltd. that “[t]he prejudgment interest
statute does not require that the damages be readily ascertainable.” 680 N.W.2d 79, 88
(Minn. 2004).
Ivy parties argue that Commonwealth is not entitled to prejudgment interest on
damages that it had not yet incurred. We disagree because section 549.09,
subdivision 1(b), includes no incurrence requirement, except “as to special damages.” We
therefore reverse the June 26, 2013 prejudgment-interest award and remand for the
district court to recalculate prejudgment interest based on section 549.09, subdivision
1(b).
Affirmed in part, reversed in part, and remanded.
19