Auto-Owners Insurance Company, et al., Appellants, vs. Heggie's Full House Pizza, Inc., Respondent, Nova Industries, Inc., a Wisconsin corporation, Respondent, Bimet Corporation, an Illinois corporation, Respondent, M.H. Rhodes, Respondent.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2002).

 

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A03-316

 

Auto-Owners Insurance Company, et al.,
Appellants,
 
vs.
 
Heggie's Full House Pizza, Inc.,
Respondent,
 
Nova Industries, Inc.,
a Wisconsin corporation,
Respondent,
Bimet Corporation,
an Illinois corporation,
Respondent,
 
M.H. Rhodes,
Respondent.

 

 

Filed October 7, 2003

Affirmed

Wright, Judge

 

Mille Lacs County District Court

File No. C3-01-282

 

 

Thomas E. Emmer, Teresa A. Anderson, Emmer & Lively, P.A., 1800 Pioneer Creek Center, P.O. Box 39, Maple Plain, MN  55359 (for appellants)

 

Paul Wocken, Willenbring, Dahl, Wocken & Zimmermann, PLLC, Red River at Main, P.O. Box 417, Cold Spring, MN  56320 (for respondent Heggie's Pizza)

 

Michael R. Peterson, John G. Ness & Associates, 6465 Wayzata Boulevard, Suite 450, St. Louis Park, MN  55426 (for respondent Nova Industries)

 

Patrick D. Reilly, Erstad & Riemer, P.A., 200 Riverview Office Tower, 8009 34th Avenue South, Minneapolis, MN  55425 (for respondent M.H. Rhodes)

 

Sandra J. Grove, Joseph Goldberg & Associates, 1660 South Highway 100, Suite 102, St. Louis Park, MN  55416 (for respondent Bimet Corporation)

 

 

            Considered and decided by Harten, Presiding Judge, Anderson, Judge, and Wright, Judge.

 

U N P U B L I S H E D  O P I N I O N

 

WRIGHT, Judge

 

Appellants, owners and insurers of a building destroyed by fire, sued respondents, each of whom had a role in the manufacture or supply of a pizza oven alleged to have started the fire.  The district court granted summary judgment in favor of respondents.  Appellants contend that (1) summary judgment was erroneously granted because there are genuine issues of material fact as to their theories of breach of warranties, strict liability, and negligence; (2) the district court abused its discretion when it dismissed the case due to spoliation of evidence; and (3) the award of costs and disbursements was erroneous.  We affirm.

FACTS

 

            On July 5, 1998, the restaurant at Malmo Bay Lodge (Malmo) was destroyed by a fire.  Appellant Auto-Owners Insurance Company (Auto-Owners) insured the restaurant's owner, a partnership called the "Medinger 4," consisting of appellants Ralph Medinger, Bernice Medinger, Jean Harvey and Kathy Arseneau.  Appellants allege that one of two pizza ovens supplied by respondent Heggie's Full House Pizza, Inc. (Heggie's), which sold pizza to Malmo, caused the fire.  The oven, which Heggie's furnished to customers as long as they purchased pizza from Heggie's, was manufactured by respondent Nova Industries, Inc. (Nova); the oven's timer was manufactured by respondent M. H. Rhodes; and the thermostat was manufactured by respondent Bimet Corporation (Bimet).  Appellants sued respondents under theories of breach of express and implied warranties, strict product liability, and negligence.

            Deputy State Fire Marshal Mark Germain examined the fire scene and determined that the fire originated in the area near the two pizza ovens.  Auto-Owners retained Paul Hansen, an expert with Engineering & Fire Investigations, who provided deposition testimony regarding his examination of the pizza ovens. 

            Appellants were required to bulldoze the fire scene in August 1998 due to health and safety concerns.  Appellants preserved the pizza ovens and photographed the fire scene, but other appliances were not saved.  Because respondents were not notified prior to the destruction of the fire scene, respondents did not have the opportunity to investigate the fire scene. 

            After discovery, the district court granted summary judgment in favor of each respondent and subsequently awarded Bimet and M.H. Rhodes costs and disbursements.  This appeal followed.

 

D E C I S I O N

 

I.

 

            On appeal from summary judgment, we ask two questions: (1) whether there are any genuine issues of material fact and (2) whether the district court erred in its application of the law.  State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).  Summary judgment is appropriate when the matter before the district court has no genuine issues of material fact and one party is entitled to judgment as a matter of law.  Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).  A genuine issue for trial must be established by substantial evidence.  DLH, Inc. v. Russ, 566 N.W.2d 60, 69-70 (Minn. 1997).  "[S]ummary judgment is inappropriate when reasonable persons might draw different conclusions from the evidence presented."  Id. at 69 (citing Ill. Farmers Ins. Co. v. Tapemark Co., 273 N.W.2d 630, 634 (Minn. 1978)).

               Appellants argue that the district court erred in ruling that there were no genuine issues of material fact regarding the issues of breach of express and implied warranties by Heggie's.  The warranties at issue are derived from the Uniform Commercial Code (UCC), which, as adopted in Minnesota, is codified as Chapter 336 of Minnesota Statutes.  The alleged warranties at issue here are based on Article 2 of the UCC, which applies to transactions in goods.  Minn. Stat. § 336.2-102 (2002).  A sale of goods is required to trigger the application of Article 2 and its warranties.  A sale is "the passing of title from the seller to the buyer for a price[.]"  Minn. Stat. § 336.2-106(1) (2002).  Goods are defined as all things that are movable at the time of identification to the contract for sale.  Minn. Stat. § 336.2-105(1) (2002). 

The district court ruled that Heggie's did not breach any express or implied warranties regarding the pizza ovens because, although Heggie's sold pizza to Malmo, it did not sell pizza ovens.  Appellants argue that Heggie's provision of pizza ovens to Malmo constituted a sale of goods sufficient to invoke the UCC.  Appellants characterize this relationship as "purchasing the right to possess the Nova pizza ovens" because the pizza ovens were loaned to customers as long as they purchased pizza from Heggie's.  But the record establishes that the pizza ovens were always owned by Heggie's.  Appellant Harvey conceded at deposition that she did not pay for the ovens and, if Heggie's had asked for their return, she would have returned them. 

            The evidence fails to create a factual dispute regarding whether the provision of the pizza ovens constituted a sale of goods.  Appellants' allegation that providing the ovens created "the right to possess" them falls far short of the passing of title required for a sale.  Minn. Stat. § 336.2-106(1).  The evidence establishes that the ovens were loaned; no sale occurred.  Without a sale of goods, Article 2 of the UCC does not apply to the provision of the ovens, and expressed or implied warranties were not created.  Accordingly, there are no questions of fact regarding appellants' claims of breach of express or implied warranties,[1] and summary judgment as to these claims was properly granted.

            Appellants also challenge the district court's determination that there are no genuine issues of material fact as to whether appellants can recover damages from respondents Bimet and M.H. Rhodes under a theory of strict liability.  To establish a product-liability claim based on strict liability, "an injured party must show (1) the product was in a defective condition, unreasonably dangerous to the user, (2) the defect existed when the product left the manufacturer's control, and (3) causation."  Westbrock v. Marshalltown Mfg. Co., 473 N.W.2d 352, 356 (Minn. App. 1991), review denied (Minn. Sept. 13, 1991).  But a plaintiff must not be aware of the defect to recover in a strict-liability case.  Magnuson v. Rupp Mfg., Inc., 285 Minn. 32, 40, 171 N.W.2d 201, 207 (1969); McCormick v. Custom Pools, Inc., 376 N.W.2d 471, 476 (Minn. App. 1985), review denied (Minn. Dec. 30, 1985).

            Appellants argue that fact issues remain regarding whether the timer and thermostat were defective.  The district court ruled that appellants' expert could not determine if the failure of the timer and thermostat were caused by a defect or by the natural end of the useful life of the product.  The district court also found that, even if a defect existed, it was undisputed that appellant Arseneau had knowledge of it.  Appellants contend that, because the timer and thermostat did not operate properly for the minimum number of cycles it should have operated before failing, the timer was defective.  Appellants proffer no evidentiary support, however, for the proposition that a failure to operate for the minimum number of cycles establishes that the timer was defective.  Paul Hansen, an expert retained by Auto-Owners, testified that he had no opinion on whether there was a defect in the timer.  He concluded that contacts in the thermostat welded together, which eventually caused the fire.  With regard to both the thermostat and the timer, Hanson did not know whether the cause of the fire was the end of the life of the product or a product defect.  Without evidence that the pizza oven's timer was defective, we conclude that there is not a genuine issue of material fact with regard to this issue.

            But even if a factual dispute exists regarding whether the timer and thermostat were defective, the evidence establishes that Arseneau knew of the defect.  In deposition, Arseneau testified that, on one of the ovens, the timer would stick and the heat would not dissipate.  Appellants do not dispute this issue with regard to the strict-liability claim.  Thus, we conclude that the district court did not err when it ruled that there were no genuine issues of material fact with regard to appellants' strict-liability claims.

            Appellants also contend that genuine issues of material fact exist regarding negligence claims against respondents Bimet and M.H. Rhodes.  "The essential elements of a negligence claim are: (1) the existence of a duty of care;  (2) a breach of that duty;  (3) an injury was sustained; and (4) breach of the duty was the proximate cause of the injury."  Lubbers v. Anderson, 539 N.W.2d 398, 401 (Minn. 1995).  A manufacturer has a duty to warn of dangers where it knew or should have known of the risk or hazard involved.  Germann v. F.L. Smithe Mach. Co., 395 N.W.2d 922, 924-25 (Minn. 1986).  Whether a legal duty to warn exists is a question of law for a district court.  Id. at 924.  Generally, there is no duty to warn of dangers if the user knows or should know of the potential danger.  Wiseman v. N. Pac. Ry. Co., 214 Minn. 101, 107, 7 N.W.2d 672, 675 (1943); see also Lawrence v. Hollerich, 394 N.W.2d 853, 855 (Minn. App. 1986), review denied (Minn. Dec. 17, 1986). 

The district court ruled that there is no evidence that respondents' products were defective; and, in any event, appellant Malmo's continued use of the oven, even after discovering that it was dangerous, shields respondents from liability.  Appellants argue that a question of fact exists as to whether it was reasonably foreseeable that the thermostat and timer could malfunction or wear out.  We agree with the district court's conclusion that the record fails to present any evidence that any of the respondents were responsible for a defective product or were notified that the pizza oven was malfunctioning.  Further, it is undisputed that appellant Arseneau knew of the danger presented by the pizza oven.  We, therefore, conclude that the district court did not err when it ruled that there are no genuine issues of material fact as to appellants' negligence claims against respondents.

II.

 

            Appellants next argue that the district court's sanction for spoliation of evidencedismissal of the casewas an abuse of discretion.  Spoliation is the destruction of evidence or the failure to preserve property for another's use in pending or future litigation.  Federated Mut. Ins. Co. v. Litchfield Precision Components, Inc., 456 N.W.2d 434, 436 (Minn. 1990); see also Hoffman v. Ford Motor Co., 587 N.W.2d 66, 71 (Minn. App. 1998) (stating that "[s]poliation of evidence refers to the destruction of relevant evidence by a party").  A finding of spoliation is a factual finding that we will not set aside unless clearly erroneous.  Hoffman, 587 N.W.2d at 70. 

            Courts are authorized to sanction a party for the spoliation of evidence when one party gains an evidentiary advantage due to its failure to preserve evidence after having the opportunity to examine it.  Himes v. Woodings-Verona Tool Works, Inc., 565 N.W.2d 469, 470-71 (Minn. App. 1997), review denied (Minn. Aug. 26, 1997).  Spoliation encompasses both intentional and negligent destruction of evidence.  Patton v. Newmar Corp., 538 N.W.2d 116, 118-19 (Minn. 1995); Himes, 565 N.W.2d at 471 (noting that spoliation sanction does not imply any wrongdoing on spoliator's behalf).  Regardless of intent, disposal of evidence is spoliation when a party knows or should know that the evidence should be preserved for pending or future litigation.  Patton, 538 N.W.2d at 118.  "The propriety of a sanction for the spoliation of evidence is determined by the prejudice resulting to the opposing party."  Hoffman, 587 N.W.2d at 71.

Less than a month after the fire, due to safety and health concerns, the fire scene was bulldozed.  Photographs of the fire scene were taken before its destruction.  The two pizza ovens were salvaged, but all other electrical appliances were destroyed.  Respondents were not notified prior to the destruction of the fire scene.  The district court ruled that the destruction of the evidence would result in prejudice to the respondents and granted respondents' motions to dismiss based on spoliation.  Appellants assert that the district court made a clearly erroneous interpretation of the facts in characterizing the destruction of the fire scene. 

"[A] fire scene itself is the best evidence of the origin and the cause of a fire."  Id.  Here, although the reason for destroying the fire scene demonstrates no wrongdoing, such destruction without prior notice to respondents foreclosed their opportunity to conduct an independent investigation of the fire scene.  As a result, appellants have an immense evidentiary advantage because only a small amount of physical evidencethe pizza ovenswas preserved.  Because any evidentiary basis for an alternative defense theory of causation was destroyed without prior notice to respondents, the district court's dismissal of the case due to spoliation was not an abuse of discretion.  See id. at 71 (concluding that the district court did not abuse its discretion when it imposed a spoliation sanction after determining that relevant evidence of the origin and cause of the fire had been destroyed, altered, or lost where the fire scene was destroyed, but a vehicle alleged to be the cause of the fire was not).

III.

 

               "In every action in a district court, the prevailing party . . . shall be allowed reasonable disbursements paid or incurred." Minn. Stat. § 549.04 (2002).  "[D]isbursements shall be stated in detail and verified by affidavit."  Minn. R. Civ. P. 54.04.  The district court is mandated to award reasonable costs to a prevailing party and has discretion to determine which party, if any, qualifies as a prevailing party.  Benigni v. County of St. Louis, 585 N.W.2d 51, 54-55 (Minn. 1998).  "When reviewing a request for costs and disbursements, the district court must make sufficient findings of reasonable and necessary costs and disbursements."  Beniek v. Textron, Inc., 479 N.W.2d 719, 724 (Minn. App. 1992), review denied (Minn. Feb. 19, 27, 1992).  "To make these findings, the district court must take oral testimony of all costs and disbursements with full opportunity for both direct and cross-examination so a full record is available for review."  Id. (quotation omitted).  We may overturn a district court's award for costs and disbursements when the award is an abuse of discretion.  Kellar v. Von Holtum, 605 N.W.2d 696, 703 (Minn. 2000). 

            Appellants argue that the district court abused its discretion when it ordered costs and disbursements for Bimet in the amount of $10,785.05 and M.H. Rhodes in the amount of $17,333.75.  The record contains documentation of litigation costs and affidavits presented by Bimet and M.H. Rhodes, who both prevailed by summary judgment.  In its memorandum, the district court states that, following a hearing, it "carefully reviewed the defendants' requested costs as well as Plaintiff's objections and [found] the costs and disbursements to be reasonable and necessary."  As the evidence supports the district court's findings, appellants' argument for finding an abuse of discretion is unavailing.  We, therefore, conclude that the district court's findings are sufficient to support its award of costs and disbursements. 

            Affirmed.

[1] Even if Article 2 of the UCC applied, we agree with the district court's conclusion that there is no evidence in the record that Heggie's made any express or implied warranties.  An express warranty is created upon "[a]ny affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain."  Minn. Stat. § 336.2-313(1)(a) (2002).  The only express warranty alleged to have been givenreplacement of a malfunctioning ovenwas not a warranty of the future performance of the goods.  See Anderson v. Crestliner, Inc., 564 N.W.2d 218, 222 (Minn. App. 1997) (stating that for purposes of UCC provision addressing when cause of action accrues "[a] warranty of future performance is different from a repair or replacement warranty").  Likewise, Heggie's did not breach implied warranties of merchantability or fitness for a particular purpose.  "[A] warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind."  Minn. Stat. § 336.2-314(1) (2002).  A merchant is "a person who deals in goods of the kind."  Minn. Stat. § 336.2-104(1) (2002).  There is no evidence establishing that Heggie's was a merchant with respect to pizza ovens.  An implied warranty of fitness for a particular purpose exists when a plaintiff shows (1) the seller had reason to know of the buyer's particular purpose, (2) the seller had reason to know that the buyer was relying on the seller's "skill or judgment to furnish appropriate goods," and (3) actual reliance by the buyer.  Willmar Cookie Co. v. Pippin Pecan Co., 357 N.W.2d 111, 115 (Minn. App. 1984).  A particular purpose is distinguishable from an ordinary purpose.  See Minn. Stat. § 336.2-315, Minnesota Code Cmt. (describing "[t]he implied warranty of fitness for a truly particular purpose, as distinguished from the ordinary purpose for which goods are used").  There was no evidence that Malmo intended to use the pizza ovens for any particular purpose other than baking pizzas.  Thus, even if appellants established the requisite sale of goods, their claims of breach of express or implied warranties are unavailing.