Janet C. Tangen, Personal Representative of the Estate of Thomas E. Tangen, Respondent, vs. Electro-Plating Engineering Co., Inc., Daniel M. Shiely and John A. Hoffner, Appellants, vs. Roger H. Anderson and Forty-Five West Ivy Corporation, Defendants.
This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2000).
STATE OF MINNESOTA
IN COURT OF APPEALSC8-00-2003
Janet C. Tangen, Personal Representative
of the Estate of Thomas E. Tangen,
Electro-Plating Engineering Co., Inc.,
Daniel M. Shiely and John A. Hoffner,
Roger H. Anderson and
Forty-Five West Ivy Corporation,
Filed August 14, 2001Affirmed Parker, Judge*
Washington County District Court
File No. C8-97-6147
William M. Bradt, Hansen, Dordell, Bradt, Odlaug & Bradt, P.L.L.P., 3900 Northwoods Drive, Suite 250, St. Paul, MN 55112; and
Michael G. Kula, Robert W. Johnson, P.A., 1275 St. Clair Avenue, St. Paul, MN 55105 (for respondent)
Christopher S. Hayhoe, Felhaber, Larson, Fenlon & Vogt, P.A., 4200 U.S. Bank Place, 601 Second Avenue South, Minneapolis, MN 55402 (for appellants)
Considered and decided by Willis, Presiding Judge, Halbrooks, Judge, and Parker, Judge.
U N P U B L I S H E D O P I N I O N
This lawsuit arose out of the sale of an electroplating business from respondent-seller and his co-owner to appellants-purchasers. In addition to the facilities and equipment, purchasers acquired from sellers covenants not to compete and engaged respondent-seller as an employee. Sellers also warranted that the property did not harbor any conditions that would give rise to liability under state and federal environmental law. Seven years after the sale and incident to a Minnesota Pollution Control Agency (MPCA) notice of violation, purchasers discovered that the property was contaminated, sought an offset under the asset purchase agreement, and demanded indemnification. Seeking payment under the agreement, respondent-seller sued appellants for breach of contract and purchasers counterclaimed alleging breach of warranty, the right to offset, and the right to contribution under the Minnesota Environmental Response and Liability Act (MERLA), Minn. Stat. §§ 115B.08-.24 (2000). Purchasers contend that: (a) the district court erred in concluding sellers did not breach warranties; (b) the court erred in its apportionment of liability; (c) sellers' breach of contract and violations bar enforcement of the contract; (d) the court erred in failing to award purchasers all their costs, losses and attorney fees; and (e) the court erred in failing to order a declaratory judgment. We affirm.D E C I S I O N 1. Breach of Warranty
The construction and effect of an unambiguous contract are questions of law which we review de novo. Wolfson v. City of St Paul, 535 N.W.2d 384, 386 (Minn. App. 1995). This court has defined a warranty as "an assurance that one party to a contract gives regarding the existence of a fact, upon which the other party to the contract can rely." Sterling Capital Advisors, Inc. v. Herzog, 575 N.W.2d 121, 127 (Minn. App. 1998).
The district court found that sellers did not breach the environmental warranty in the asset purchase agreement because purchasers did not prove that nickel contamination revealed by the ground water or core samples exceeded MPCA guidelines at the time of sale. Purchasers contend that the court's finding that sellers were liable for a portion of the costs of determining whether a release or threatened release of a hazardous substance had occurred on the site is inconsistent with its finding that there was not a breach of warranty.
In the agreement, except as disclosed by a required environmental real estate assessment, sellers warranted against the presence in the soil of any substances that would "support a claim or cause of action by any individual or government agency" under existing environmental statutes and regulations. The court found that the extent to which sellers and purchasers separately contributed to the release of nickel could not be determined, but concluded that both sellers and purchasers were strictly liable as persons responsible for the release or threatened release of nickel from the facility pursuant to Minn. Stat. § 115B.03, subd. 1(1) (2000). This statute provides for owner liability if the substance was located within the facility during sellers' ownership, even if the substance was not released into the soil until ownership had passed to purchasers. Id., subd. 1(1)(i), (ii). Because the district court did not find that sellers released nickel into the soil, its failure to find that they breached the environmental warranty in the agreement is not inconsistent with the imposition of liability under MERLA.
Purchasers also argue that, in light of the trial record, the district court erred by failing to find that sellers had released nickel into the soil prior to the sale. We will not reverse a district court's findings of fact unless they are clearly erroneous. Frauenshuh v. Giese, 599 N.W.2d 153, 156 (Minn. 1999). The evidence and any reasonable inferences therefrom must be viewed in a light most favorable to the prevailing party. State, Dep't of Pub. Welfare v. Thibert, 279 N.W.2d 53, 56 (Minn. 1979). The district court noted as follows:
The record as a whole indicates a lack of violations, investigations and actions by the MPCA during the sellers' period of ownership which reflects a greater degree of care in the treatment and handling of hazardous substances than does the period of ownership under the buyers; the record reflects that during the buyers' ownership of the facility and the Property, there was re-occurring spillage of plating solutions which [are] considered hazardous waste, improper storage of hazardous waste, and thirteen alleged violations of state and federal environmental law relating to hazardous waste management.
Purchasers offer a reasonable theory that separate layers of concrete installed in the floor of the facility during sellers' ownership suggest that nickel was trapped below the superior, newer layer when it was poured. However, viewed in a light most favorable to the verdict, and considering other evidence in the record of cracks in the concrete and pools of hazardous waste on the floor during purchasers' operation of the facility, we cannot characterize the district court's conclusions as clearly erroneous.
Even if the court had explicitly found that sellers had released nickel into the soil beneath the facility, it would not necessarily imply that the breach would require indemnification under the asset purchase agreement. "Claims" are defined by the agreement as "claims, demands, actions, judgments, executions or alleged liabilities of any nature * * * ." However, claims which require indemnification under the agreement are those "resulting from or on account of * * * the breach or falsity of any representations * * * made by Seller." (Emphasis added.) The "claim" in this case, as the sequence of events clearly reveals, resulted from Electro-Plating's procedures (under purchasers' ownership) for handling hazardous waste. The discovery of nickel in the soil and groundwater under the site was incident to the MPCA's dissatisfaction with purchasers' operation of the facility, and the asset purchase agreement was not designed to indemnify purchasers for their own actions. While the district court reasoned otherwise in arriving at the same result, we find that this result was appropriate under the terms of the agreement. Cf. Katz v. Katz, 408 N.W.2d 835, 839 (Minn. 1987) (stating district court is to be affirmed if it reached the right result for the wrong reason).
This conclusion is supported by the district court's award of contribution to purchasers for a portion of the costs of determining whether a release or threatened release had occurred on the site. This contribution serves the court's recognition that, at the point where the investigation proceeded beyond an examination of the procedures in use at Electro-Plating to a survey of what damage had occurred, MERLA imposes liability on the sellers for storing nickel during their ownership of the facility. See Minn. Stat. § 115B.03, subd. 1(1). But to provide, as sought by purchasers, that sellers should indemnify them for the costs of responding to an investigation precipitated by purchasers' own operation of the facility is clearly not the purpose of the agreement. We commend the district court for a well-crafted and equitable solution to a complex liability problem.2. Apportionment of Liability
Purchasers contend that the district court's apportionment of liability under MERLA was erroneous. Where the district court has weighed statutory criteria in light of specific factual findings, we review that judgment under an abuse of discretion standard. Maxfield v. Maxfield, 452 N.W.2d 219, 221 (Minn. 1990).
In apportioning to sellers 30% of the costs of determining whether a release or threatened release of a hazardous substance had occurred on the site, the court considered several factors provided by Minn. Stat. § 115B.08, subd. 1. Purchasers argue that, because the district court did not explicitly address the last of the six factors listed in subdivision 1, the apportionment was inappropriate. See Minn. R. Civ. P. 52.01 (stating that "the court shall find the facts specially and state separately its conclusions of law thereon and direct the entry of the appropriate judgment"). The district court's findings should be clear, specific, complete and pertinent to the issues to provide a basis for legal conclusions and to allow proper appellate review. Woodrich Constr. Co. v. State, 287 Minn. 260, 263, 177 N.W.2d 563, 565 (1970). But where the factual findings are incomplete, we may construe those findings "in the light of the entire record, including the evidence, to ascertain the intention of the trial court." Stevens v. Minneapolis Fire Dep't Relief Ass'n, 219 Minn. 276, 282, 17 N.W.2d 642, 646 (1945) (citations omitted); see also National Union Fire Ins. Co. v. Evenson, 439 N.W.2d 394 (Minn. App. 1989) (interpreting district court's factual findings in light of record where record adequate to provide meaningful review).
The record contains abundant relevant evidence for the apportionment of liability under MERLA. The record contrasts the compliance history of Electro-Plating under the separate ownership of sellers and purchasers. The record details the methods used by Electro-Plating to dispose of hazardous waste throughout its history. The record indicates the level of toxicity of nickel used in Electro-Plating's operations. Purchasers properly point out that the district court never addressed what knowledge the parties may have had of the hazardous nature of the substance as required by Minn. Stat. § 115B.08, subd. 1(6). But we are not convinced that superior knowledge on the part of sellers, under the circumstances of this case, would make any difference in the apportionment of liability. We hold that the district court did not abuse discretion in apportioning liability between sellers and purchasers under MERLA for the costs of determining whether a release or threatened release of hazardous substances had occurred on the site.3. Breach of Contract
Purchasers argue that sellers' breach of warranty under the contract bars their enforcement of the contract provisions. See MTS Co. v. Taiga Corp., 365 N.W. 2d 321, 327 (Minn. App. 1985) (holding lessor barred from enforcing contract provision against sublessee, where lessor in breach of contract, and sublessee's breach directly resulted from lessor's initial breach). Because, as we have held, the district court correctly decided that sellers did not breach any warranties under the asset purchase agreement, this argument need not be discussed.4. Award of Response Costs, Economic Losses, and Attorney Fees
Purchasers contend that the district court erred in failing to award them all of their response costs, economic losses, and attorney fees under MERLA. The construction of statutory provisions is a question of law subject to de novo review. Brookfield Trade Ctr., Inc. v. County of Ramsey, 584 N.W.2d 390, 393 (Minn. 1998).
The district court determined that purchasers were entitled to contribution under MERLA for certain response costs directly related to determining whether a release or threatened release had occurred on the site. These costs resulted from the extraction and testing of core samples from the floor and soil beneath the site, as well as assessing the groundwater in the vicinity of the site. Purchasers maintain that they should also have received the following: (1) costs incident to ensuring that no further contamination escapes through the floor of the facility; (2) economic losses (namely, a diminution in the value of the real estate) resulting from the presence of nickel in the soil beneath the facilty; (3) attorney fees incident to the MPCA investigation; and (4) all future response costs incurred in addressing, remediating, or removing the contamination beneath the site.
Purchasers base their claim of entitlement to all past and future response costs upon Minn. Stat. § 115B.04, subd. 1 (2000). Purchasers are correct in asserting that sellers, as persons responsible for a release or threatened release of a hazardous substance from the facility, were strictly liable for such costs. Id. Purchasers fail to acknowledge, however, that they also were deemed responsible persons by the district court, and that their liability is joint and several. Id. As previously discussed, the court properly apportioned such liability using the factors provided in Minn. Stat. § 115B.08, subd. 1.
Purchasers base their claim for economic losses upon Minn. Stat. § 115B.05, subd. 1 (2000). Unlike section 115B.04, section 115B.05 provides liability only to those responsible for the actual releasenot the threatened releaseof a hazardous substance. While the district court found that purchasers signed a stipulated agreement with the MPCA stating that Electro-Plating "caused wastes to be discharged into the soil due to the deteriorated condition of the floor conveyance system," such an admission cannot be imputed to sellers. Because the court never found that sellers were responsible for a release, it was not required to assess their liability for economic loss.
Finally, purchasers seek attorney fees pursuant to Minn. Stat. § 115B.14 (2000). This statute provides that the court may award such fees to a party prevailing under MERLA. See Minn. Stat. § 645.44, subd. 15 (2000) (stating "[m]ay' is permissive"). Reading the record in a light most favorable to the court's verdict, we conclude that the court did not abuse discretion in declining to award such fees.5. Declaratory Relief
Finally, purchasers sought and did not receive a declaratory judgment from the district court for all response costs incurred by it in the future, with such judgment to be binding in any future action among the parties. See Minn. Stat. § 555.01 (2000) (empowering the courts "to declare rights, status, and other legal relations whether or not further relief is or could be claimed"). Because the district court did not determine that sellers released nickel into the soil beneath the facility and the MPCA required no further remedial action, the decision to deny declaratory relief to the purchasers must be sustained. Cf. Samuelson v. Farm Bureau Mut. Ins. Co., 446 N.W.2d 428, 430 (Minn. App. 1989) (district court's factual findings in a declaratory judgment action must be sustained "unless they are palpably and manifestly contrary to the evidence") (citation omitted), review denied (Minn. Nov. 22, 1989).
* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.
 Thomas Tangen, who had remained in the employment of Electro-Plating, died in May 1997. The agreement specified that its terms would continue following his death.
 This assessment disclosed Electro-Plating's use of nickel prior to the sale to purchasers.
 The MPCA determined that no remediation efforts were necessary but required entry of a restrictive covenant requiring MPCA approval for any alteration of the facility or its use.
 This factor would appear to be more relevant in a situation where, for instance, liability is being apportioned between a producer and transporter or disposer of hazardous waste.