Polk County, Appellant, vs. Widseth.Smith.Nolting, Respondent, and Mark II of Fosston, Inc., 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This opinion will be unpublished and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

A04-681

 

Polk County,

Appellant,

 

vs.

 

Widseth.Smith.Nolting,

Respondent,

 

and

 

Mark II of Fosston, Inc.,

Respondent.

 

Filed December 21, 2004

Affirmed

Kalitowski, Judge

 

Polk County District Court

File No. C7021651

 

Patrick R. Morley, Morley Law Firm, Ltd., Box 14519, Grand Forks, ND 58208-4519 (for appellant)

 

Holly J. Newman, Mackall, Crounse & Moore, PLC, 1400 AT&T Tower, 901 Marquette Avenue, Minneapolis, MN 55402 (for respondent Widseth.Smith.Nolting)

 

Kyle E. Hart, Scott A. Johnson, Fabyanske, Westra & Hart, P.A., 800 LaSalle Avenue, Suite 1900, Minneapolis, MN 55402 (for respondent Mark II of Fosston, Inc.)

 

            Considered and decided by Kalitowski, Presiding Judge; Wright, Judge; and Forsberg, Judge.*

U N P U B L I S H E D   O P I N I O N

KALITOWSKI, Judge

            Appellant Polk County challenges the district court's grant of summary judgment in favor of respondent Mark II of Fosston, Inc. arguing that the district court erred in finding (1) appellant failed to give timely and proper notice of its claim to respondent; and (2) appellant waived its claim for liquidated damages by making final payment.  We affirm.

D E C I S I O N

            On appeal from a grant of summary judgment, an appellate court must review:  (1) whether there are any genuine issues of material fact and (2) whether the lower courts erred in their application of the law.  State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).  When reviewing a summary judgment motion, this court "must view the evidence in the light most favorable to the party against whom judgment was granted."  Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).

I.

Appellant, fiscal agent for a lake improvement district, argues that the district court erred in barring its claims on the ground that appellant failed to give notice as required by the construction contract.  Construction and effect of a contract is a matter of law, and so a reviewing court need not defer to the trial court's conclusion and may review the issue de novo.  Plaza Assocs. v. Unified Dev., Inc., 524 N.W.2d 725, 728 (Minn. App. 1994), review denied (Minn. Jan. 25, 1995).  Reviewing courts must construe a contract as a whole so as to harmonize all provisions, if possible, and to avoid a construction that would render one or more provisions meaningless.  Chergosky v. Crosstown Bell, Inc., 463 N.W.2d 522, 525-26 (Minn. 1990).

Here, the record indicates that appellant's principal, the lake improvement district, did not give written notice of claims to respondent as required by the following provision in the contract:

            A. Notice:  Written notice stating the general nature of each Claim, dispute, or other matter shall be delivered by the claimant to ENGINEER and the other party to the Contract promptly (but in no event later than 30 days) after the start of the event giving rise thereto.  Notice of the amount or extent of the Claim, dispute, or other matter with supporting data shall be delivered to the ENGINEER and the other party to the Contract within 60 days after the start of such event . . .

 

In addition, another provision in the contract states that "[n]o Claim for an adjustment in Contract Price or Contract Times (or Milestones) will be valid if not submitted in accordance with [the notice provision]."

Our review of the record indicates that appellant never directly notified respondent of its claims in writing.  After the project was substantially completed, the engineer compiled and sent a punch list of items to respondent to complete by the final completion date of September 30, 2000.  Following the completion date, respondent continued to complete contract work because of construction delays and completed emergency work on a culvert in December of 2000.

On June 28, 2001, the engineer notified respondent regarding concerns with the project.  Respondent then convened a meeting to resolve appellant's concerns regarding repairs of certain items, completion of certain items, and the issue of liquidated damages.  At the meeting, the parties agreed that respondent did not complete certain contract items because of weather conditions that made it impossible to do so.  Respondent agreed to complete all the work requested except for one item that was functioning as designed.  The parties did not resolve the issue of liquidated damages at the meeting.

Then, on December 14, 2001, the engineer wrote to appellant to notify appellant that respondent completed all the required contract work except for seeding of an area that was recently disturbed and some erosion control work.  The engineer suggested that respondent should be paid on the remainder of the contract except for a retainer for work completed in the spring.  The engineer's letter addressed all claims brought to respondent's attention in June.  And the record reveals no other communications from appellant to respondent with regard to any other claims.

Appellant, acting as fiscal agent, paid respondent the remainder of the amount due except for the retainer on April 2, 2002.  And appellant paid the retainer on December 17, 2002.

The district court found that appellant was in breach for failure to follow the terms of the contract because appellant did not provide respondent with written notice and did not allow the engineer to resolve the dispute over allegedly uncompleted work.  The district court also barred appellant's warranty claims and claims for work preformed not according to contract specifications because appellant failed to give notice under the contract to respondent. 

The Minnesota Supreme Court has upheld contractual notice provisions.  Buchman Plumbing Co. v. Regents of the Univ. of Minn., 298 Minn. 328, 215 N.W.2d 479 (1974).  In Buchman the court stated that contractual notice provisions were for the benefit of the party receiving notice to allow the party to cure a defect or delay.   Id. at 339, 215 N.W.2d at 486.  The court held that written notice, when required by contract, is a condition precedent to a breach claim.  Id.

We conclude that the district court properly granted summary judgment since no material facts were in dispute that appellant failed to provide respondent with direct written notice of claims as required by the contract. 

II.

Appellant argues it did not waive its claim for liquidated damages under the parties' contractual waiver clause because the payment tendered on December 17, 2002, was not a final payment.  Alternatively, respondent argues that even if the last payment was final, respondent's obligation for liquidated damages survived the final payment.

The contract's waiver of claims clause provided that final payment constituted a waiver of all claims by owner against the contractor except for unsettled liens, defective work, or from the contractor's continuing obligations.  And appellant did not dispute that it paid all money owing to respondent.  Therefore, the district court properly determined that appellant made final payment.

While no Minnesota courts have addressed this type of contractual waiver clause, the Illinois Appellate Court has interpreted a similar clause in Centerre Trust Co. of St. Louis v. Continental Ins. Co., 167 Ill. App. 3d 376, 521 N.E.2d 219 (Ill. App. Ct. 1988).  In Centerre, the contractor failed to meet the construction project substantial completion date, triggering a claim for liquidated damages in the amount of $3,000 per day.  Centerre, 167 Ill. App. 3d at 378, 521 N.E.2d at 220.  But the owner continued to make payments even though the owner knew of the claim for liquidated damages.  Id.  The owner made final payment and sued nearly two years later for the liquidated damages.  Id. at 378-79, 521 N.E.2d at 220.  As was the case here, the contract provided that final payment would constitute waiver of claims.  Id. at 379, 521 N.E.2d at 220. The Centerre court reasoned that under Illinois law, final payment does not constitute waiver of claims for latent defects, but that known claims are waived upon final payment.  Id. at 381, 521 N.E.2d at 222.

The Centerre courtalso rejected the owner's attempt to exempt the claim from waiver by arguing that the "work" was defective.  Id.  Again, the definition of "work" in the contract was materially similar to the provision in the case at bar.  Id.  The Centerre court found that the provision referred to defects in material and labor and not failure to comply with time deadlines.  Id.  Further, the court reasoned that if the owner's argument were taken to its ultimate conclusion, any noncompliance, known or unknown, would not be waived by final payment and such a reading would engulf the waiver provision in the contract.  Id.

Likewise, the Minnesota Supreme Court has upheld a contractual waiver clause but permitted the owner to bring a claim against the contractor for faulty workmanship and materials.  Indep. Consol. Sch. Dist. No. 24, Blue Earth County v. Carlstrom, 277 Minn. 117, 151 N.W.2d 784 (1967).  The supreme court reasoned:  "final payment operates to bar all claims between the parties except that in the case of defects due to faulty work or materials which appear within one year from substantial completion, the owner has a right of action."  Id. at 121, 151 N.W.2d at 787.  Thus, Minnesota also requires that claims discovered prior to final payment but after substantial completion must be preserved prior to payment or they are waived. 

Here, appellant knew of the claims for liquidated damages prior to making the payment for the remainder of respondent's contract. Therefore, following the reasoning of Centerre and Carlstrom, the liquidated damages claim is barred.  And because we conclude that appellant waived liquidated damages by making final payment, we do not reach the issue of whether respondent completed the contract.

Affirmed.

*  Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.