State: Minnesota
Volume: 312
Term: 1977-1977
Jurisdiction(s): Minnesota
Source: https://static.case.law/minn/312.pdf

STATE v. WILLIAM ELMER WEEKES.
250 N. W. 24 590.

January 21, 1977—No. 46023.

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C. Paul Jones, State Public Defender, and Gregory A. Gaut,
Assistant State Public Defender, for appellant.

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Warren Spannaus, Attorney General, Richard G. Mark, As-
sistant Attorney General, Frederick S. Suhler, Jr., and Gary
Hansen, Special Assistant Attorneys General, and Thomas
Nagel, County Attorney, for respondent.

Heard before Rogosheske, Peterson, and Scott, JJ., and con-
sidered and decided by the court en banc.

ROGOSHESKE, JUSTICE.

Defendant, William Elmer Weekes, was found guilty by a jury
of manslaughter in the first degree upon an information charg-
ing him with causing the death of a 38-year-old child by an inten-
tional assault of striking the child in the abdomen with his fist
with such force and violence that great bodily harm was reason-
ably foreseeable. Minn. St. 609.20(2).1 'The prosecution’s unre-
futed medical testimony supported its theory that the child died
from internal hemorrhaging as a direct result of the blow de-
scribed by defendant in an oral statement, which was later tran-
scribed and signed by him and admitted into evidence over his
objection. In addition to defendant’s claim that the evidence was
insufficient to support the jury’s guilty verdict, three significant
constitutional issues are raised on this appeal from the judg-
ment: (1) Whether custodial confinement of defendant “for in-
vestigation” without a warrant and without probable cause con-
stituted an unlawful arrest in violation of Fourth Amendment
guarantees; (2) if defendant was unlawfully arrested or con-
fined, whether warnings required by the Fifth Amendment and
prescribed by Miranda v. Arizona, 384 U. S. 436, 86 S. Ct. 1602,

1 Minn. St. 609.20 provides in pertinent part: “Whoever does any of
the following is guilty of manslaughter in the first degree and may be
sentenced to imprisonment for not more than 15 years or to payment
of a fine of not more than $15,000, or both:

ee Kk KOK

“(2) Causes the death of another in committing or attempting to
commit a crime with such force and violence that death of or great
bodily harm to any person was reasonably foreseeable, and murder in
the first or second degree was not committed thereby * * *,”

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16 L. ed. 2d 694 (1966), constitute a per se attenuation of the
taint of such illegal arrest and confinement in all cases; and (3)
whether the record in the instant case is adequate to find that
there was sufficient attenuation of the taint of illegal detention
to render admissible the inculpatory statements made by defend-
ant after he had been given repeated Miranda warnings. We an-
swer the first issue in the affirmative, and the second, in ad-
herence to Brown v. Illinois, 422 U. 8. 590, 95 S. Ct, 2254, 45
L. ed. 2d 416 (1975), and Wong Sun v. United States, 371 U. S.
4T1, 83 S. Ct. 407, 9 L, ed. 2d 441 (1963), in the negative. Find-
ing the record inadequate to rule on the third issue, we remand
for reconsideration by the trial court with directions to conduct
such further evidentiary hearings as may be necessary to deter-
mine the admissibility of defendant’s statement under the guide-
lines expressed in the Brown case. If the statement is found to
be admissible, the conviction is affirmed, if not, a new trial is,
granted.

Viewing the evidence most favorable to uphold the guilty ver-
dict, as we must, the jury could find that Michael Biel, the
83-year-old son of unmarried Kathleen Biel, died at 4 p. m., April
25, 1974, about 35 minutes after he was brought to the hospital
in Litchfield for emergency treatment by his mother and de-
fendant. The post-mortem examination revealed that the cause
of death was an acute intra-abdominal hemorrhage, brought on
by a 1 centimeter tear in the small bowel mesentary, that filled the
child’s abdominal cavity with roughtly two-thirds of his blood
supply. Defendant was 20 years old at the time of the incident
and had been residing with Kathleen and her son in Litchfield
since mid-January 1974 following his honorable discharge from
the army. They had first met in December 1973 when defendant
visited Litchfield on leave. At that time, divorce proceedings to
dissolve defendant’s first marriage were pending. Following de-
fendant’s discharge, he worked at two jobs for brief periods, the
last of which terminated in March 1974 when he was hospitalized
for a “nervous” condition described as a “seizure or black-out”

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problem that was exacerbated by excessive drinking. He fre-
quently babysat Michael during the daytime while Kathleen at-
tended classes at the Willmar technical school. His relationship
with Kathleen and her child was such that as soon as his divorce
became final, he planned to marry her and adopt Michael.”

‘On the evening of the child’s death, April 25, defendant was
interviewed by law enforcement officials at Kathleen’s home and
at the Litchfield Police Department. Most of the interviewing
was done by Agent John Barry of the Minnesota Bureau of
Criminal Apprehension, who first advised defendant of his
Miranda rights. At this time, defendant denied striking the child
or in any way hurting him.

During the days which followed, investigations by law enforce-
ment officials continued. On the morning of May 2, defendant
was summoned to the office of the sheriff of Meeker County. He
appeared voluntarily, and after Miranda warnings were given,
defendant was asked by the sheriff whether he had struck the
child. Again he denied it. This interview was taped and sub-
sequently transcribed, but was not signed by defendant. For rea-
sons which are not clear from the record, defendant was con-
fined by the sheriff following this interrogation. According to
the sheriff, he was detained “for his own protection, and other
people,” since the sheriff knew that several weeks earlier defend-
ant had been hospitalized for the “seizure and black-out” prob-
lem. The following testimony indicates, however, that defendant
may have been held merely for investigation:

“Q. So you arrested him for his own protection, is that right?

“A. He wasn’t arrested.

“Q. But you put him in jail?

“A. Yes. I was trying to find out what was going on, and I
didn’t want anything to happen.

“Q. Did you consider him under arrest when you put him in
the cell in your jail?

2¥ollowing Michael’s death, defendant and Kathleen were in fact
married.

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“A. For investigation.”

About 4 p. m. on the first day of defendant’s confinement,
Agent Barry interrogated him again in the commissioner’s room
at the Meeker County courthouse. Miranda warnings were re-
peated and defendant continued to deny having anything to do
with the child’s death. A transcription of this tape-recorded
interview was made which defendant did not sign.

In the afternoon of the following day, May 3, defendant after.
being given another Miranda warning was again questioned by
the sheriff. Later that evening, Agent Barry received a call at
his home from Kathleen Biel who indicated that defendant
wanted to talk to him. After Miranda warnings were twice re-
peated, defendant gave an oral tape-recorded statement to Agent
Barry which was later transcribed. This statement was signed
the next day after defendant made an appearance, unrepresented
by counsel, before a magistrate where he was further advised
of his rights.

The 21-page statement, ruled admissible in pretrial proceed-
ings, was read to the jury at trial and later defendant repeated
its contents virtually verbatim while testifying on his own be-
half. Both the statement and defendant’s testimony revealed that
on the night of Apri] 23, 1974 (2 days before the child’s death),
he had been drinking at a local bar with an old girlfriend. After
he had had quite a bit to drink, Kathleen arrived inopportunely
and found him talking to her. Kathleen became quite upset and
went home. Defendant finally returned home at 12:30 a. m., and
stayed up until 3 a. m. trying to resolve his differences with
Kathleen.

The next morning defendant remained in bed after Kathleen
went to school. Around 8:30, Michael went upstairs and asked
him to fix breakfast. Defendant complied and then returned to
bed since he was not feeling well. Later at about 10 a. m., the
child again awakened defendant, who this time told him to go
back downstairs and watch TV or play with his toys. At noon

the child complained that he was hungry and defendant fixed
him lunch, after which he returned to bed.

Somtime between 1 and 1:30 that afternoon, Michael returned
upstairs and began pulling on the sheets of defendant’s bed. He
wanted defendant to go downstairs and play, but was told to play
by himself. Thereupon the child started crying uncontrollably,
and defendant admonished him, “[Q]uit erying or I’m going to
spank you.” Defendant then arose and dressed while Michael con-
tinued to cry. Thereafter, in defendant’s own words:

«« * * [Michael] kept crying, and ah, when he didn’t stop
I was going to slap him on the arm, or by the hand or something,
and when I went to slap him, I don’t know, know why, but when
my hand was coming down, I closed my fist, and I hit him in the
stomach.”

Michael immediately fell to the floor and in rolling over toppled,
down the nearby stairs head-first. Defendant ran after the child
‘and placed him on a couch, where he lay quietly watching TV.
until his mother returned home from school.

That evening and the next morning the child refused to eat,
complaining of a stomach ache, and spent the morning sitting
on a couch. When his mother returned from school that after-
noon, his condition was obviously such as to require medical at-
tention, and he was rushed to the hospital where he died shortly
thereafter.

We deem it unnecessary to demonstrate in detail that the direct,
circumstantial, and medical opinion evidence compels our holding
that the jury could justifiably have found defendant guilty as
charged beyond a reasonable doubt in that he intentionally struck
the child with such force that great bodily harm or death was
foreseeable.

The vexing problem concerns defendant’s claim that the admis-
sibility of his signed statement violated his Fourth Amendment
rights. The admissibility of the statement was presented and de-

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cided at pretrial Rasmussen proceedings.* As we read the record
of those proceedings, the testimony appears to have been directed
at the issue of whether defendant’s statements were preceded
by adequate Miranda warnings and were made voluntarily, thus
making them admissible under Fifth Amendment standards.

While there is little doubt that defendant received adequate
Miranda warnings, the question which remains unanswered from
our review of the Rasmussen record is whether defendant’s
Fourth Amendment rights were also protected. Assuming the
sheriff’s utmost good faith in his judgment that defendant
should be confined for the “protection” of himself and others or
held for “investigation,” it is nevertheless clear that defendant
was taken into custody and confined without a warrant and with-
out probable cause in violation of Fourth Amendment guaran-
tees, for absent probable cause there is not and never has been
any lawful basis for “holding” a person “for investigation” or
“on suspicion.” Davis v. Mississippi, 394 U. S. 721, 89 S. Ct. 1394,
22 L. ed. 2d 676 (1969); State v. Mitchell, 285 Minn. 153, 172
N. W. 2d 66 (1969). Indeed this is the very essence of the protec-
tion afforded by the Fourth Amendment freedom of “[t]he right
of the people to be secure in their persons” against unreasonable
seizures of both physical and verbal evidence which may be used
in a criminal prosecution. Wong Sun v. United States, 371 U. 8.
AT1, 88 S. Ct. 407, 9 L. ed. 2d 441; Mapp v. Ohio, 367 U. S. 643,
81S. Ct. 1684, 6 L. ed. 2d 1081 (1961).

Where as here an illegal arrest and confinement has occurred
the admissibility of a subsequent incriminating statement is to
be determined by whether such statement is “sufficiently an act
of free will to purge the primary taint of the unlawful invasion”
in light of the policies served by the Fourth Amendment exclu-
sionary rule, rather than the Fifth Amendment protection
against self-incrimination. Wong Sun v. United States, 371 U.

3 See, State ex rel. Rasmussen v. Tahash, 272 Minn. 539, 141 N. 'W. 2d
3 (1965).

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S. 486, 88 S. Ct. 416, 9 L. ed. 2d 454; Brown v. Illinois, 422 U. S.
590, 598, 95 S. Ct. 2254, 2259, 45 L. ed. 2d 416, 424.

In the Brown case, decided 8 months after the trial court’s
decision in the present appeal, the defendant had been illegally
arrested at gunpoint for murder by detectives of the Chicago
police force without a warrant and without probable cause. With-
in 2 hours after Brown’s arrest he had made the first of two in-
criminating statements that were later used against him at trial.
Following conviction, the Supreme Court of Illinois affirmed
on the ground that the Miranda warnings, which had preceded
both confessions, were sufficient per se to purge the primary
taint of the unlawful arrest.

In reversing the conviction, the United States Supreme Court
held that the admissibility of incriminating statements obtained
without a warrant is a Fourth Amendment question, and that
Miranda warnings which offer Fifth Amendment protection do
not in themselves substantially purge the taint of an illegal arrest
and detention. Rather, the crucial question is whether on the
facts of each case the inculpatory statement is the product of the
accused’s free will tested by whether the connection between the
illegal arrest and detention and the statement has been so attenu-
ated as to dissipate the taint of the initial illegality. The court
declared that although “the Fifth Amendment is in ‘intimate re-
lation’ with the Fourth” and while the two often appear to
“coalesce,” the exclusionary rule under the Fourth Amendment
“serves interests and policies that are distinct from those it
serves under the Fifth [which] is directed at all unlawful search-
es and seizures, and not merely those that happen to produce in-
criminating material or testimony as fruits.” 422 U. S. 601, 95
S. Ct: 2260, 45 L. ed. 2d 425. Even though adequate Miranda
warnings avoid the exclusionary rule sanctions under the Fifth
Amendment, such warnings do not in any way inform the ac-
cused of Fourth Amendment rights, which include the right to
be released from unlawful custody following arrest and confine-
ment without a warrant or probable cause. Thus, if the Miranda

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warnings could in all cases be used as a “cure-all” for an illegal
arrest, law enforcement officers would be encouraged to dis-
regard the guaranties of the Fourth Amendment with impunity,
eviscerating its protective scope.

In elaborating the criteria that are to be followed: when con-
sidering the admissibility of an inculpatory statement under
Fourth Amendment standards, the court noted (422U. S. 603,
95 S. Ct. 2261, 45 L. ed. 2d 427):

“# * * No single fact is dispositive. The workings of the hu-
man mind are too complex, and the possibilities of misconduct too
diverse, to permit protection of the Fourth Amendment to turn
on such a talismatic test. The Miranda warnings are an im-
portant factor, to be sure, in determining whether the confession
is obtained by exploitation of an illegal arrest. But they are not
the only factor to be considered. The temporal proximity of the
arrest and the confession, the presence of intervening circum-
stances, * * * and, particularly, the purpose and flagrancy of
the official misconduct are all relevant. * * * The voluntari-
ness of the statement is a threshold requirement. * * * And
the burden of showing admissibility rests, of course, on the
prosecution.”

Because of the claimed similarity of the facts in the instant
case to those of Brown, we are urged by defendant to hold his
statements inadmissible and to set aside his conviction. Converse-
ly, the state urges that because the facts and circumstances of
Brown are distinguishable and the evidence supports the guilty
verdict, we should affirm defendant’s conviction. We are not per-
suaded to do either. The state has now finally conceded that our
review must begin with the premise that defendant was unlaw-
fully confined and detained in jail for more than 34 hours before
his oral statement. We must also on this record agree with de-
fense counsel that the question of the legality of defendant’s ar-
rest and confinement was raised by defendant’s general motion
to suppress the statements and that the transcribed signed state-

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ment is the fruit of defendant’s oral statement. However, it is
apparent from the Rasmussen record that the question of
whether defendant’s statements were admissible under Fourth
Amendment standards was not expressly presented or decided
by the trial court. To affirm the conviction would not only re-
quire that we ignore the above and other deficiencies in this rec-
ord but would also provoke defendant to raise the issue by col-
lateral attack in a postconviction proceeding where his testimony
and other relevant evidence not included in this record would un-
doubtedly be presented. On the other hand, to reverse the convic-
tion in the face of the evidence, including defendant’s statements
which, if admissible, would support his conviction, would in our
opinion offend procedural due process to the state by precluding
the opportunity not previously afforded of carrying the burden
of proof to establish that defendant’s statements were an inter-
vening, independent act of his free will.

We conclude that the alternative which best serves the ad-
ministration of justice is to remand this case for a redetermina-
tion of the admissibility of defendant’s statements under the
Brown criteria. Attention should be directed on remand to
whether the intervening facts and circumstances were such as
to purge the primary taint of defendant’s illegal arrest and de-
tention. Testimony and evidence covering the treatment of de-
fendant while confined, his relationship with his interrogators,
and his freedom of communication with persons other than law
enforcement officers would be particularly relevant. Should the
trial court, after a rehearing, find that defendant’s statements
were an intervening, independent product of his free will so as
to dissipate the taint of his illegal detention and confinement,
his conviction is affirmed; otherwise, a new trial is granted.

Remanded with directions.

PETERSON, JUSTICE (concurring specially).

I concur in the remand of this case for proceedings to fully de-
termine whether defendant’s statements made to the police of-

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ficers were an intervening, independent product of his free will
so as to dissipate the taint of his patently illegal detention. Even
so, however, there is substantial evidence on this record, unless
otherwise refuted, which would establish that the subsequent
confession was untainted by the confinement. On the evening
of May 8, following the inception of his confinement, it appears
from this record that Kathleen Biel, mother of the deceased child,
‘contacted John Barry, an agent for the Minnesota Bureau of ~
Criminal Investigation, and indicated that defendant wished to
talk to him. Barry, after again advising defendant of his consti-
tutional rights, received and transcribed defendant’s statement,
which defendant signed the next day, May 4.1 At no time did de-
fendant indicate that he had in any way been coerced into making
his statement. At trial, moreover, defendant took the stand in
his own defense and repeated virtually verbatim the contents
of his statement to Agent Barry.
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BEMIDJI SALES BARN, INC. v. GILBERT CHATFIELD.
250 N. W. 2d 185.

January 21, 1977—No. 46655.

1 The lapse of time is itself significant in distinguishing this case from
the situation in. Brown. v. Illinois, 422 U. S. 590, 95 S. Ct. 2254, 45 L. ed.
2d 416 (1975). In Brown the defendant had made the first of two in-
criminating statements within 2 hours after his illegal arrest. Here the
intervening period of time was closer to 2 days. The United States Su-
preme Court in Brown (422 U. S. 603, 95 S. Ct. 2261, 45 L. ed. 2d 427) had
indicated that the “temporal proximity of the arrest and the confes-
sion,” as well as the giving of Miranda warnings, were among the cir-
cumstances to be considered in assessing the admissibility of the state-
ments.

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Tupper & Smith, Harlan E. Smith, and Kimball D. Mattson,
for appellant.

Murphy, Lano, Kalar &-Murphy, William Kalar, and O. C.
Adamson II, for respondent.

Heard before Rogosheske, Peterson, and Scott, JJ., and con-
sidered and decided by the court en banc.

ROGOSHESKE, JUSTICE.

Defendant, Gilbert Chatfield, purchased breeding heifers from
plaintiff, Bemidji Sales Barn, Inc., at auction. Upon defendant’s
refusal to make good his check for payment or to return the
cattle, plaintiff sued defendant for the purchase price. Defend-
ant counterclaimed, alleging damages resulting from a breach
of an express warranty by plaintiff that the cattle were prop-
erly vaccinated for shipping fever and breach of an implied war-

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ranty of merchantability. The trial judge, sitting without a jury
by agreement of the parties, found a breach of the express war-
ranty alleged and awarded defendant special damages totaling
$8,614. This amount was the aggregate of $1,114 for veterinary
fees, $500 for incidental expenses incurred by defendant’s care
and treatment of the cattle, and $2,000 consequential damages
for cattle deaths caused by plaintiff’s breach. This award was
offset against the award to plaintiff of $10,982 for the auction
sale price of the cattle. Additional consequential damages claimed
by defendant for loss of a 1978 “calf crop” and the cost of feed
and care for the period during the animals’ convalescence and
nonproductivity were disallowed. Defendant’s appeal challenges
only the adequacy and propriety of the consequential damages
awarded and disallowed. We affirm the trial court’s disposition
including the disallowance of additional consequential damages
claimed by defendant.

On the afternoon of March 9, 1972, defendant attended an auc-
tion on the premises of plaintiff in Bemidji and purchased 62
head of mixed heifers. The purchase of these cows was intended
to double the size of defendant’s already existing breeding herd
from 62 to 124 head. Before the auction commenced, the auc-
tioneer represented that the cows had been “vaccinated for ship-
ping fever and were ready for the farm.” However, as the trial
court found, the cattle had only been vaccinated the day before,
and since at least 2 weeks are needed to develop adequate im-
munity, the vaccinations had little if any preventative effect.

Immediately following the sale, defendant had the cows
shipped by truck from the sales barn to his ranch in Boy River.
When the cattle arrived on the evening of March 9, some of the
cattle had already started coughing and defendant was con-
cerned that they might have contracted shipping fever. For the
remainder of that night the 62 new head were closely confined
in a 66- by 30-foot area inside defendant’s barn. Early the next
morning, after defendant noticed that one of the new cows was
dead and two others were down, he contacted his veterinarian,

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who examined the cattle and diagnosed the problem as shipping
fever. The doctor prescribed various drugs to treat the disease,
and, further, advised defendant to keep his healthy cows separate
from the sick ones. Thereupon, defendant immediately stopped
payment on the check he had given plaintiff for the purchase
price of the animals.

Treatments by the doctor continued for the next month while
the cattle remained enclosed in the barn. During this time the
old herd came into frequent contact with the new inside the barn,
where only a wooden fence separated the two herds. Eventually,
the shipping fever epidemic spread throughout the newly pur-
chased herd, and some of the cows in the old herd also became
infected with the highly contagious disease. Toward the end of
March, an epidemic of pinkeye broke out which affected both
herds, and by July 30 at least 19 cows had died, 17 of the new
cows and 2 of the old herd, ostensibly from either shipping fever
or pinkeye. Six additional head were also allegedly lost from the
epidemics, but the evidence casts doubt as to the actual causes
of death. The bloated bodies of two of these cows were found in
defendant’s field, but no post-mortem examination was ever con-
ducted to determine the cause of death, and the bodies of the re-
maining four were never found.

Originally defendant planned to breed both herds in July 1972,
which would have produced a “calf crop” during the year 1973.
Due to the epidemics, however, the animals had lost approximate-
ly 50 to 75 pounds each and the veterinarian advised against
breeding the herds in July. Even through there was some evi-
dence indicating that the cattle had regained their weight by the
fall of 1972, defendant did not breed his herds until the follow-
ing spring, thus losing the entire “calf crop” intended for 1973.

The trial court’s award to defendant of $8,614 in consequential
damages arose from plaintiff’s undisputed breach of an express
warranty created at the time of sale under Minn. St. 336.2—313
when material representations were made that the cattle “had
been vaccinated for shipping fever and were ready for the

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farm.”! Consequential damages, as defined by § 336.2—715 (2) ,?
are fully recoverable for breach of warranty under § 336.2—
714(8). Before reviewing defendant’s assignments of error, we
emphasize that although remedies are to be “liberally admin-
istered,” § 836.1—106, the burden of pleading and proving con-
sequential loss still remains on the buyer. § 336.2—715, U.C.C.
Comment 4, 21A M. S. A. p. 727.

Defendant first challenges the trial court’s disallowance of
damages for the lost “calf crop” in 1978 and the cost of feeding
and maintaining the nonproductive heifers during this period.
Lost profits, provided they are foreseeable by the seller, are
clearly recoverable under § 386.2—714(3), and were long recog-
nized as a form of compensable damage prior to adoption of the
Uniform Commercial Code. Appliances, Inc. v. Queen Stove
Works, Inc. 228 Minn. 55, 86 N. W. 2d 121 (1949) ; Lanesboro
Produce & Hatchery Co. v. Forthun, 218 Minn. 877, 16 N. W. 2d
826 (1944). Additionally, a buyer may seek recovery of excess
feed and care costs required to maintain breeding animals that
are nonproductive due to a seller’s breach of warranty. See,

1 Minn. St. 336.2—313 provides in pertinent part: “(1) Express jwar-
ranties by the seller are created as follows:

“(a) Any 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 creates an express warranty that the goods shall conform to
the affirmation or promise.

“(b) Any description of the goods which is made part of the basis
of the bargain creates an express warranty that the goods shall con-
form to the description.”

2Minn, St. 336.2—715(2) provides: “(2) Consequential damages re-
sulting from the seller’s breach include

“(a) any loss resulting from general or particular requirements and
needs of which the seller at the time of contracting had reason to know
and which could not reasonably be prevented by cover or otherwise;
and

“(b) injury to person or property proximately resulting from any
breach of warranty.”

16 Es
W & W Livestock Enterprises, Inc. v. Dennler, 179 N. W. 2d 484
(Iowa 1970).

The weakness of defendant’s argument, however, is that he
failed to adequately prove at trial that his losses were the result
of plaintiff's breach. While it is undoubtedly true that the
heifers were too debilitated from the shipping fever to be bred
in July 1972, there was no substantial explanation for defend-
ant’s prolongation of the breeding vacation until the following
spring. It is entirely probable that the weight loss suffered by
the cattle had been completely recovered by the fall, which would
still have permitted a calf crop for 1973. Moreover, there was
conflicting expert testimony as to whether the heifers could have
been successfully bred in July even if they had remained healthy.
We therefore hold that the trial court’s refusal to award damages
for the loss of a calf crop and for food and care costs is not clear-
ly erroneous justifying appellate relief. Rule 52.01, Rules of Civil
Procedure.

Defendant also appeals the court’s $2,000 limitation placed
on damages awarded for cattle deaths. This figure was estab-
lished by the trial judge because of uncertainty in the actual
number of cattle that perished from shipping fever and because
“contributory negligence undoubtedly helped magnify the losses”
claimed by defendant.

We initially reject defendant’s assertion that $4,428.25 should
have been awarded, based on a loss of 25 heifers at an average
price of $177.13 per head. The bodies of four of these cattle were
never found, and in the case of two others there was insufficient
evidence to determine whether shipping fever had in fact been
the cause of death. At best, defendant only met his burden of
proving the loss of 19 heifers, which would have entitled him to
a maximum award of $3,365.

We further hold that the additional reduction of damages to
$2,000 is justified, although the trial judge should more correctly
have predicated his finding on defendant’s failure to avoid in-
jurious consequences of plaintiff’s breach rather than on con-

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tributory negligence. The doctrine of avoidable consequences,
unlike contributory negligence, takes effect only after a legal
wrong has occurred, but while some damage may still be pre-
vented. Prosser, Torts (4 ed.) § 65, p. 422. While the law pro-
vides the claimant with a remedy whether he seeks to avoid in-
jurious consequences or not, the amount of damages recoverable
is limited to the extent that he acted reasonably to prevent his
own loss. Casper v. Frederick, 146 Minn. 112, 177 N. W. 986
(1920); Restatement, Contracts, § 836, comment d. In the
present case, the burden of proof rests with plaintiff to establish
that defendant acted unreasonably in failing to arrest the spread
of shipping fever after it became apparent that plaintiff’s ex-
press warranty regarding proper vaccination had been breached.
Lanesboro Produce & Hatchery Co. v. Forthun, 218 Minn. 377,
16 N. W. 2d 326.

Expert testimony at trial indicated that the spread of shipping
fever can be significantly reduced by separating the sick animals
from the healthy ones, and defendant, an experienced rancher,
knew of this precautionary measure. Yet, the new herd was con-
tinuously confined in a 66- by 30-foot area for well over a month,
where the spread of the highly contagious disease was virtually
insured. The infection of the old herd with shipping fever can
easily be explained by the fact that only a wooden fence sepa-
rated the two herds. On these facts we are persuaded that plain-
tiff met his burden of proving that at least some of the cattle
deaths could have been averted had defendant practiced proper
animal husbandry.

Affirmed.

Le
STATE v. EDWARD LaVALLE DUNCAN.
250 N. W. 2d 189.
January 21, 1977—No. 46097.

18

C. Paul Jones, State Public Defender, and Robert Oliphant,
Assistant State Public Defender, for appellant.

Warren Spannaus, Attorney General, William B. Randall,
County Attorney, and Steven C. DeCoster, Assistant. County At-
torney, for respondent.

Heard before Todd, MacLaughlin, and Yetka, JJ., and con-
sidered and decided by the court en banc.

‘YETKA, JUSTICE.

Edward LaValle Duncan appeals his conviction of aggravated
robbery. At the time of the alleged crime the appellant was 17.
After a referral hearing and order for prosecution as an adult
pursuant to Minn. St. 260.125, the case was tried to a jury in

| 19

Ramsey County District Court. The appellant was sentenced to
a maximum of 20 years to be served at the State Reformatory
for Men, St. Cloud. He requests a reversal of his conviction with
a dismissal of the charges or, in the alternative, a remand to
juvenile court for a new referral hearing. We affirm.

The issues raised in this appeal are the following:

(1) Whether the pretrial lineup was impermissibly sugges-
tive.

(2) Whether the appellant’s certification for trial as an adult
was proper.

(3) Whether the trial court abused its discretion in ordering
a joint trial.

(4) Whether the evidence was sufficient to support the jury’s
verdict of guilt beyond a reasonable doubt.

On the morning of November 6, 1974, the Shell service station
at 874 North Lexington, St. Paul, was robbed and Dale Faulkner,
the attendant on duty, was beaten. Faulkner testified that at
about 10 a.m. that morning, two youths approached the station
from behind the building and requested change for a ten dollar
bill. The three then went into the office so that Faulkner could
get change from the cash register. As soon as the register was
open the two youths began to assault Faulkner and pulled him
from the office area into the service area and later into the stor-
age room. They kicked him and beat him severely about the face
and head with their fists and possibly with an oil can. .

A customer testified that at the time the robbery was in pro-
gress, she stopped at the station and while waiting for her car
to be serviced, noticed a man come into the office from the work
area and stand in front of the cash register. She decided to enter
the station, pushed open the door to the office area, walked
toward the back of the station, and stopped when she heard
voices say something like: “Give me the cash or the stash.” —
“I told you I don’t have it.” —“I told you to give me the cash.”

The customer returned to her car, drove to a store across the
street and asked the attendant to call the police. She then

20 ee

watched through the front window of the store until the police
arrived. Except for the 3 or 4 minutes when she was crossing
from the service station, she observed the station continuously
and saw no one enter or leave the building, although several cars
pulled in and waited for service during that time.

While the three were still in the storage room, the police ar-
rived, responding to a call that a robbery was in progress. One
of the officers entered the station, and after hearing voices in
the storage area, approached the storage room. On the way he
observed blood spots on the floor and a smashed water can. When
he arrived at the closed door to the storage room, he announced
himself as a police officer and said, “come on out—I have a shot-
gun.” The door was opened by the appellant’s codefendant, Jamie
Tucker, who attempted to close the door on the officer. The police,
officer then kicked the door open, and arrested appellant Duncan
and his codefendant Tucker.

The victim told the police he had been beaten by the two youths
arrested.

Analysis of the youths’ clothes revealed spots of blood, and a
red substance was found on the youths’ hands.

A search at the scene of codefendant Tucker’s pockets revealed
$4.75 in quarters, $3.50 in dimes, 31 one dollar bills, 5 five dollar
bills, 1 ten dollar bill, and 15 keys.

On November 7, 1974, the day after appellant was arrested,
a violation referral petition was filed in regard to the appellant
in Ramsey County district court, juvenile division. On November
18, 1974, a hearing was held in juvenile court on the question
of whether the violation should be referred to the appropriate
prosecuting authorities pursuant to Minn. St. 260.125. On the
following day, November 19, the court ordered reference for
prosecution on grounds the public safety would not be served by
disposition in juvenile court.

On December 17, 1974, the appellant was identified by Faulk-
ner in a lineup at the St. Paul police department. The lineup had
been requested by the defendants and attorneys ifor both defend-

Es 21

ants were present. The lineup consisted of six youths, two of
whom were the defendants, who were of similar age, height, and
build, and of the same race. Four of the youths were dressed in
street clothes; the two defendants were dressed in jail clothes.
Faulkner identified each of the defendants.

At a Rasmussen hearing on February 3, 1975, appellant’s at-
torney objected to the lineup as being “impermissively sugges-
tive.” The court ruled that the lineup was not improper since all
the youths were of approximately the same age, height, and build,
and of the same race, and since the street clothing worn by the
other youths was of the same type worn by the defendants on
the date of the offense.

When both matters were called for trial, the court granted the
state’s motion for a joint trial in the interests of justice. Both
defendants appeared personally in chambers and agreed to a
joint trial after consultation with their separate attorneys.

At trial both Duncan and Tucker were found guilty by jury
verdict of aggravated robbery and after a presentence investiga-
tion were sentenced to the Minnesota Corrections Authority for
a maximum term of 20 years. Duncan appeals from the judg-
ment of conviction.

HI Lineup and Identification of Appellant.

The appellant contends that he was identified in court as a re-
sult of an impermissibly suggestive pretrial lineup.

The applicable test for the sufficiency of lineup procedures
is whether in light of the totality of the surrounding circum-
stances the procedures employed are impermissibly suggestive
and conclusive to irreparable mistaken identification so as to re-
sult in a denial of due process. E. g., Broberg v. State, 287 Minn.
66, 176 N. W. 2d 904, certiorari denied, 400 U. S. 848, 91 S. Ct.
87, 27 L. ed. 2d 79 (1970).

This issue, as pointed out by the state, is controlled by Broberg
v. State, supra. In the lineup in which the defendant in that case
was identified, he was the only person dressed in a workhouse
uniform, and only one other of the participants was of the de-

22 EE

fendant’s approximate height. Although this court held that the
lineup may have fallen short of the ideal, it was not so suggestive
as to deny the defendant his right to due process.

Furthermore, even if the lineup was tainted, a reversal is not
required if the record establishes clearly and convincingly that
the in-court identification had an independent source and was
not the product of the lineup. See, United States v. Wade, 388
U.S. 218, 239, 87 S. Ct. 1926, 1939, 18 L. ed. 2d 1149, 1164
(1967).

In the present case, there was an adequate independent basis
for the in-court identification of Duncan by Faulkner. Faulkner
identified Duncan as one of his assailants at the scene of the
erime to police officers. See, Broberg v. State, supra.

We feel the need to point out that the lineup in this case fell
short of the ideal although it did not result in a denial of due
process. We submit that fairness dictates that if a suspect is
to appear in a lineup with others who are dressed in civilian
clothing, the suspect himself should be permitted to wear civilian
clothing ; or, in the alternative, if others appearing with the sus-
pect are in prison garb, then the suspect as well as all others
should appear in prison garb. In short, all participants in a line-
up should wear either civilian or prison clothing.

Ml Referral to District Court Under Minn. St. 260.125.

The appellant was 17 years old at the time of the alleged of-
fense and therefore originally subject only to the jurisdiction
of the juvenile court system. Minn. St. 260.111. A violation refer-
ral petition, which contained the following allegations, was filed
in regard to the appellant in Ramsey County juvenile court:

“He did on or about November 6, 1974, within the corporate
limits of St. Paul, Ramsey County, State of Minnesota, wrong-
fully and unlawfully and knowing he was not entitled thereto,
take in the presence of Dale Faulkner personal property consist-
ing of U. 8. currency and he the said Edward Duncan used force
against Dale Faulkner to overcome his resistance, he, the said

as 23,

Edward Duncan then and there and while committing the said
robbery did inflict bodily harm upon Dale Faulkner.”

Minn. St. 260.125 outlines the procedure to be followed and
the circumstances which must be present before a juvenile can
be referred to the district court for prosecution as an adult on
the basis of this petition. That statute provides:

“Subdivision 1. When a child is alleged to have violated a
state or local law or ordinance after becoming 14 years of age
the juvenile court may enter an order referring the alleged viola-
tion to the appropriate prosecuting authority for action under
laws in force governing the commission of and punishment for
violations of statutes or local laws or ordinances. The prosecuting
authority to whom such matter is referred shall within the time
specified in such order of reference, which time shall not exceed
90 days, file with the court making such order of reference notice
of intent to prosecute or not to prosecute. If such prosecuting
authority files notice of intent not to prosecute or fails to act
within the time specified, the court shall proceed as if no order
of reference had been made. If such prosecuting authority files
with the court notice of intent to prosecute the jurisdiction of
the juvenile court in the matter is terminated.

“Subd, 2. The juvenile court may order a reference only if

“(a) A petition has been filed in accordance with the provi-
sions of section 260.131

“(b) Notice has been given in accordance with the provisions
of sections 260.185 and 260.141

“(c) A hearing has been held in accordance with the pro-
visions of section 260.155, and

“(d) The court finds that the child is not suitable to treat-
ment or that the public safety is not served under the provisions
of laws relating to juvenile courts.

“Subd. 38. When the juvenile court enters an order referring
an alleged violation to a prosecuting authority, the prosecuting

24 es

authority shall proceed with the case as if the jurisdiction of the
juvenile court had never attached.”

Appellant contends that the district court lacked jurisdiction
over him because the reference hearing was defective for the fol-
lowing three reasons: (1) There was no finding that the appel-
lant was not suitable to treatment; (2) the evidence was insuf-
ficient to support the juvenile court’s determination that “the
public safety is not served under the provisions of laws relating
to juvenile courts”; and (3) there was no probable cause to be-
lieve the allegations in the petition. Each is without merit.

First, as to the contention that there was no finding of non-
suitability to treatment, the court need only find either non-
amenability to treatment or, in the alternative, a threat to public
safety before reference is permissible. State v. Hogan, 297 Minn.
480, 488, 212 N. W. 2d 664, 669 (1978). In this case, the judge
based his decision on the threat to public safety.

Second, as to the amount of evidence required to support the
finding of a threat to public safety, this court has stated in
Hogan (297 Minn. 438, 212 N. W. 2d 669):

“In determining if the public safety would be threatened,
among the relevant factors to be considered are: (1) The serious-
ness of the offense in terms of community protection; (2) the
circumstances surrounding the offense; (3) whether the offense
was committed in an aggressive, violent, premeditated, or willful
manner; (4) whether the offense was directed against persons
or property; (5) the reasonably foreseeable consequences of the
act; and (6) the absence of adequate protective and security fa-
cilities available to the juvenile treatment system. See, Mikul-
ovsky v. State, 54 Wis. 2d 699, 196 N. W. 2d 748 (1972) ; Note,
54 Minn. L. Rev. 389, 404 (1969).”

In his memorandum accompanying the order for referral to
district court, Judge Gingold stated:

“The record reveals that the said Edward LaValle Duncan ap-
peared in the Ramsey County Juvenile Court on August 6, 1971,

as 25

and was adjudicated for Larceny; he appeared on September
29, 1971, for Tampering with an Auto and was placed on proba-
tion; that the matter was dismissed on May 8, 1972. That he was
adjudicated on October 10, 1974, for Burglary and Carrying a
Concealed Weapon and placed on probation under the supervision
of the Department of Court Services.”

This court recently enunciated the standards for review of
orders granting or denying reference in In re Welfare of I. Q. S.
809 Minn. 78, 244 N. W. 2d 30 (1976). This court first stated
(809 Minn. 88, 244 N. W. 2d 36):

«* * * [FJour procedural safeguards, meeting, due process
requirements, must attend all waiver proceedings:

“(1) If the juvenile court is considering a waiver of juris-
diction, the juvenile is entitled to a hearing;

“(2) The juvenile is entitled to representation by counsel
at such hearing;

“(8) The juvenile’s attorney must be given access to the
juvenile’s social record on request; and

“(4) If jurisdiction is waived, the juvenile is entitled to a
statement of reasons in support of the waiver order.”
Then, in regard to review of orders of reference, we stated (309
Minn. 86, 244 N. W. 2d 87):

“Within the legislative scheme, which upon analysis satisfies
constitutional standards, the juvenile court is empowered to
order reference solely upon its finding ‘that the child is not suit-
able to treatment or that the public safety is not served under
the provisions of laws relating to juvenile courts.’ Minn. St. 260.-
125, subd. 2(d).

“The complexity of review of the juvenile court’s orders in the
individual matters is, in some instances, compounded by a lack
of its particular findings of fact upon which the statutory con-
clusion is based. In those instances, we have relied heavily upon
the record to supplement any inadequacy in the court’s findings.
However, we would prefer—and think it is the responsibility

26 ee

of the juvenile court—to have orders granting or denying refer-
ence accompanied by a sufficient statement of the reasons for
and considerations leading to that decision. By this holding, we
do not mandate that the statement necessarily meet formal or
conventional findings-of-fact requirements. However, the state-
ment should sufficiently demonstrate the court’s full investiga-
tion of the matter, that careful consideration has led to its deci-
sion, and upon which statutory basis the court has relied. Satis-
faction of this requirement would afford this court more mean-
ingful review. Kent v. United States, supra.

“Minn. St. 260.125 vests in the juvenile court considerable lati-
tude within which it may determine whether to retain jurisdic-
tion over the juvenile or, subject to statutory delimitation, waive
that jurisdiction. This substantial discretion presupposes proce-
dural regularity sufficient in each case presented to satisfy the
basic requirements of due process and fairness. Therefore, such
findings will not be disturbed upon appeal absent a showing that
they are ‘clearly erroneous’ so as to constitute an abuse of dis-
cretion.”

Because the order contains sufficient statement of the reasons
for the referral, which are supported in the record, it cannot be
said that such findings were clearly erroneous.

Finally, as to the third contention, the lack of a probable cause
hearing does not raise an issue of substance. The United States
Supreme Court noted in Breed v. Jones, 421 U. S. 519, 538, note
18, 95 S. Ct. 1779, 1790, 44 L. ed. 2d 346, 360 (1975), that a
probable cause hearing for a juvenile prior to transfer to adult
proceedings would not raise any problems of double jeopardy;
however, the Breed court left open the issue of whether due
process requires a probable cause hearing prior to referral. The
court stated (421 U. S. 587, 95 S. Ct. 1789, 44 L. ed. 2d 360):

“A requirement that transfer hearings be held prior to ad-
judicatory hearings affects not at all the nature of the latter pro-
ceedings. More significant, such a requirement need not affect

Es 27
the quality of decisionmaking at transfer hearings themselves.
In Kent v. United States, 383 U. S. at 562, the Court held that
hearings under the statute there involved ‘must measure up to
the essentials of due process and fair treatment.’ However, the
Court has never attempted to prescribe criteria for, or the na-
ture and quantum of evidence that must support, a decision to
transfer a juvenile for trial in adult court.” (Italics supplied.)

Several states, by statute, require a probable cause hearing prior
to referral, see, e. g., In re Maricopa County, Juvenile Action No.
J-72804, 18 Ariz. App. 560, 504 P. 2d 501 (1972); Inre R. J. C.
v. State, 520 P. 2d 806 (Alaska 1974); and, as appellant’s brief
points out, the Uniform Juvenile Court Act, which is in effect
in at least two states (North Dakota and Georgia), also requires
a probable cause hearing prior to referral. However, to date no
court has required it as a matter of constitutional law. In 1974
(prior to Breed), one law review article listed at least 20 state
statutes which required a finding of probable cause before refer-
ral. See, Carr, The Effect of the Double Jeopardy Clause on Juve-
nile Proceedings, 6 U. of Toledo L. Rev. 1, 21.

The issue of whether such a hearing is constitutionally man-
dated, however, was recently considered in A Juvenile v. Com-
monwealth, 347 N. E. 2d 677 (Mass. 1976). A juvenile chal-
lenged the constitutionality of the Massachusetts referral sys-
tem adopted after Breed v. Jones, supra, on grounds, inter
alia, that a probable cause hearing before referral is a constitu-
tional requirement. The Massachusetts scheme was later
amended to provide for a probable cause hearing prior to refer-
ral, however, the juvenile’s referral took place prior to the
amendment and he attacked the constitutionality of the earlier
procedure. The court held that under the earlier statute such a
hearing was not required prior to referral (847 N. E. 2d 682):

“Having concluded that a transfer hearing could have been.
conducted prior to an adjudicatory hearing under the then gov-

28 es

erning statute, we now turn to the plaintiff’s claim that an evi-
dentiary or probable cause hearing on the merits of the complaint
is constitutionally required before a decision to dismiss a juve-
nile complaint may be rendered. Although we recognize that it
is permissible under Breed to introduce substantial evidence at
the transfer hearing to show that the juvenile committed the
offense in question, see Stokes v. Commonwealth, supra at
836 N. E. 2d 735, we do not believe that such an evidentiary
showing is constitutionally mandated. The Supreme Court in
Breed declined to express any opinion as to whether an evi-
dentiary hearing with respect to the commission of the offense
was a necessary component of a transfer hearing. It indicated
that ‘the Court has never attempted to prescribe criteria for, or
the nature and quantum of evidence that must support, a deci-
sion to transfer a juvenile for trial in adult court.’ 421 U. 8S. at
587, 95 S. Ct. at 1790. See note 4 supra.

“A transfer hearing is not intended to resolve the issue of the
juvenile’s guilt or innocence, and, in fact, under Breed, it would
be unconstitutional to do so. Rather, the Juvenile Court, at the
time of this proceedings, had to determine whether it was in ‘the
public interest’ to treat the juvenile as an adult (see G. L. c. 119,
§ 61, as appearing in St. 1964, c. 308, § 2) by considering such
factors as the amenability of the child to treatment as a juvenile,
the seriousness of the alleged offense, and the necessity of safe-
guarding the public from the child. See note 12 infra. After the
transfer hearing, under the then prevailing law, if jurisdiction
was waived by the judge, the juvenile was entitled to a probable
cause hearing on the adult complaint. This sequence was con-
sidered by then Circuit Judge Stevens to ‘adequately protect a
person’s rights; there is no constitutional requirement that a
probable cause showing must be made twice.’ United States ex
rel. Bombacino v. Bensinger, 498 F, 2d 875, 878 (7th Cir.), cert.
denied, 419 U. S. 1019, 95'S. Ct. 492, 42 L. Ed. 2d 292 (1974).”

The Massachusetts court, however, did add in a footnote (347
N. E. 2d 683, note 9):

a 29

“9. Although we hold that an evidentiary hearing is not con-
stitutionally mandated, we believe that the preferable approach,
in light of the importance of a decision to transfer a juvenile,
is for there to be a determination of probable cause at the trans-
fer hearing. In this regard, as we have noted, G. L. c. 119, § 61,
as appearing in St. 1975, c. 840, § 1, requires a judge to make
a determination, during the transfer hearing, whether probable
cause exists. At this hearing, the judge should state in advance
that the purpose of the hearing is to determine if probable cause
exists and to decide if the juvenile should be transferred and not
to conduct an adjudicatory hearing on the merits of the com-
plaint. See Stokes v. Commonwealth, supra at 336 N. BE. 2d
735 (Mass. Adv. Sh. [1975] at 3043-3045). This procedure raises
no double jeopardy problem under Breed and preserves more
effectively the special rights and protections granted a juvenile
under our statutes.”

Thus, a probable cause hearing at the time of referral is not
constitutionally required, although it is required by statute in
many states.

The cases cited in appellant’s brief in support of his argument
that a probable cause hearing is required involve detentions of
juveniles without any probable cause hearing. For example, in
Cooley v. Stone, 414 F. 2d 1218 (D. C. Cir. 1969), one of the cases
cited by appellant, a 16-year-old was confined without a probable
cause hearing for 16 days before finally being released on a writ
of habeas corpus.

It is not disputed that a fair and reliable determination of
probable cause must be provided when there is any significant
pretrial restraint on liberty in a criminal proceeding. The issue
is when such a determination must be made in a juvenile certifi-
cation proceeding such as this. The appellant contends that as
amatter of constitutional law, probable cause must be determined
prior to referral instead of during the adult proceedings; while
the state argues that the lack of a probable cause determination
at the referral stage would be harmless error because a probable

80 es

cause determination is made at the adult proceedings. While a
probable cause determination prior to referral may be deemed
preferable, we cannot say that it is constitutionally required.

While the juvenile court is not required to find probable cause,
in absence of other relevant grounds for referral, such as past
record, the court can and should consider in sufficient detail the
facts of the crime in order to justify a referral for adult prosecu-

- tion.
Hf Trial Court’s Discretion in Ordering a Joint Trial.

The appellant contends the trial court abused its discretion in
ordering a joint trial with the codefendant because the court
neither informed him that he had a statutory right to a separate
trial nor inquired whether he was aware of the possible effects
of waiving this right.

Minn. St. 1974, § 631.03,1 which was in effect at the time of
the appellant’s trial, provided:

“When two or more defendants shall be jointly indicted or in-
formed against for a felony, they shall be tried separately provid-
ed, however, upon written motion, the court, in the interest of
justice and not related to time or economy may order a joint trial
for any two or more said defendants. In cases other than felonies,
defendants jointly indicted or informed against may be tried
jointly or separately, in the discretion of the court. In all cases
any one or more of said defendants may be convicted or acquit-
ted.”

The record indicates that the appellant’s counsel discussed
the matter with him, and that the appellant expressed his desire
to be tried jointly.

On this set of facts, appellant’s contentions are without merit
for three reasons. First, because appellant in the presence of his
counsel informed the court that he consented to a joint trial and
his attorney raised no objection to a joint trial, the issue can-

1 Minn. St. 1974, § 681.03 was superseded by Rule 17.03, subd. 2(1),
Rules of Criminal Procedure, which became effective July 1, 1975.

as 31

not be raised on appeal. State v. Bergland, 294 Minn. 558, 202
N. W. 2d 228 (1972). Second, appellant is incorrect in his conten-
tion that he had an absolute statutory right to a separate trial.
The statute, as it existed prior to 1969,? had been construed as
giving a defendant an absolute right to a separate trial. See,
State v. Robinson, 271 Minn. 477, 479, 186 N. W. 2d 401, 403, cer-
tiorari denied, 882 U. S. 948, 86S. Ct. 410, 15 L. ed. 2d 356
(1965) ; State v. Martineau, 257 Minn. 334, 342, 101 'N. W. 2d
410, 415 (1960). The policy of this state still strongly favors
separate trials, and recognizes that they should be the rule rather
than the exception, State v. Swenson, 301 Minn. 199, 201, 221
N. W. 2d 706, 708 (1974). However, appellant’s contention that
he has an absolute right to a separate trial is no longer the law
in Minnesota. See, State v. Swenson, supra. Thus, as the state
contends, it would have been an incorrect statement of the law
for the trial court to state to the appellant that he had an abso-
lute right to a separate trial. Moreover, this court has disfavored
the practice of having the trial court attempt to outline the
strategical aspects of a separate trial where defendants are rep-
resented by counsel. See, State v. Robinson, 271 Minn. 477, 479,
136 N. W. 2d 401, 404, certiorari denied, 382 U. 8. 948, 86 S. Ct.
410, 15 L. ed. 2d 356 (1965).

Finally, there is no showing in the present case that the appel-
lant was prejudiced by being tried jointly with his codefendant.
The interests of the defendants were the same, and both the ap-
pellant and his codefendant and their respective counsel agreed
that a joint trial would be in the best interests of each.

IM Sufficiency of the Evidence.

The standard of review for determining sufficiency of the evi-
dence for a jury verdict was stated by this court in State v. El-
lingson, 283 Minn. 208, 211, 167 N. W. 2d 55, 57 (1969):

2Minn. St. 1967, § 631.03, provided: “When two or more defendants
shall be jointly indicted for a felony, any defendant who shall require
it shall be tried separately. In other cases defendants jointly indicted

may be tried jointly or separately, in the discretion of the court, and
any one or more may be convicted or acquitted.” (Italics supplied.)

82 es

“Tt will be noted that in reviewing the sufficiency of the evi-
dence we do not try the facts anew. Our responsibility extends
no further than to make a painstaking review of the record to
determine whether the evidence, direct and circumstantial,
viewed most favorably to support a finding of guilt is sufficient
to permit the jury to reach that conclusion. State v. Daml, 282
Minn. 521, 162 N. W. (2d) 240; State v. Keezer, 274 Minn. 292,
148 N. W. (2d) 627.

“In State v. Carmichael, 275 Minn. 148, 145 N. W. (2d) 554,
and State v. Houge, 280 Minn. 372, 159 N. W. (2d) 265, this court
made it clear that the weight and credibility of disputed evidence
were for the jury. Furthermore, applying the standards set forth
in State v. Schabert, 222 Minn. 261, 24 N. W. (2d) 846, and State
v. Armstrong, 257 Minn. 295, 101 N. W. (2d) 398, this court will,
upon review of the evidence in the case of a claim that it was in-
sufficient to support the verdict, take the most favorable view
of the state’s testimony to which it is reasonably susceptible. In
doing so, this court must assume that the jury believed the state’s
testimony and disbelieved that which contradicted it.”

The elements of aggravated robbery are set forth in Minn. St.
609.245, which provides:

“Whoever, while committing a robbery, is armed with a dan-
gerous weapon or inflicts bodily harm upon another is guilty
of aggravated robbery and may be sentenced to imprisonment
for not more than 20 years or to payment of a fine of not more
than $20,000, or both.”

“Robbery” is then defined in Minn. St. 609.24 as:

“Whoever, knowing he is not entitled thereto, takes personal
property from the person or in the presence of another and uses
or threatens the imminent use of force against any person fo
overcome his resistance or powers of resistance to, or to compel
acquiescence in, the taking or carrying away of the property is
guilty of robbery and may be sentenced to imprisonment for not

ee 33

more than ten years or to payment of a fine of not more than
$10,000, or both.”

The appellant does not deny his presence at the scene of the
erime. Appellant contends, however, the testimony of the victim,
Dale Faulkner, the principal witness for the state, was insuf-
ficient to prove that the appellant was responsible for the as-
sault or the property loss sustained.

The credibility of the witness, however, was clearly a question
for the jury. If the jury believed Faulkner, as we must assume
it did, e. g., State v. Schabert, 222 Minn. 261, 24 N. W. 2d 846
(1946), his testimony, coupled with the circumstantial evidence
corroborating it, is sufficient to sustain the verdict. At the trial,
Faulkner identified appellant as one of the youths who requested
change and later assaulted him. On the basis of such evidence
it would be difficult to hold that the evidence is insufficient to
sustain the verdict.

The trial court is affirmed.

HARRY VERMES v. AMERICAN DISTRICT
TELEGRAPH COMPANY AND OTHERS.
251 N. W. 2d 101.

January 21, 1977—Nos. 46284, 46300.

— Ee 35

Abdo & Abdo and E. John Abdo, for appellant American Dis-
trict Telegraph Company.

Meagher, Geer, Markham, Anderson, Adamson, Flaskamp &
Brennan, J. Richard Bland, and O. C. Adamson IT, for appellant
Apache Corporation.

Robins, Davis & Lyons, A. James Anderson, and Robert M.
Wattson, for respondent.

Heard before Rogosheske, Peterson, and Scott, JJ., and con-
sidered and decided by the court en banc.

Scott, JUSTICE.

These are separate appeals by two of the defendants in an ac-
tion brought by Harry Vermes, owner of a jewelry store in the
Foshay Tower in Minneapolis, to recover losses sustained when
his store was burglarized. Defendants were the American Dis-
trict Telegraph Company (ADT), which had supplied Vermes
with a burglary detection system; the Apache Corporation
(Apache), which had leased the space to Vermes; and The Towle
Company (Towle), which managed the Foshay Tower at the time
of the burglary.

Trial was by jury in the district court. In a special verdict, the
jury allocated negligence percentages among the parties and set
damages at $23,000. Plaintiff’s post-trial motion to increase dam-
ages to $47,185.03 was granted. Defendants’ motions for judg-
ment notwithstanding the verdict and a new trial were denied.
These appeals are by ADT and Apache from the judgment below
and the order denying the various post-trial motions.

In 1968 Harry Vermes leased space in the Foshay Tower’s
first floor for his jewelry store. A few weeks later Vermes.en-
tered into a contract with ADT for burglar alarm service. In
1970 Towle replaced Apache as building manager.

On Monday morning, August 28, 1971, Vermes discovered that
his store had been burglarized. The police investigation deter-
mined that entry had been made through the ceiling of the vault
area. A mechanical-equipment access room was located over the

36 ee

plaintiff’s store and the thin floor of this room formed the ceil-
ing of plaintiff’s store. The construction design allowed easy
entry into the vault from above. The wholesale value of the prop-
erty taken was $47,185.03.

Testimony at trial centered around two issues: (1) Among
Vermes, Apache, and Towle, who was responsible for the ceil-
ing problem which allowed the entry? (2) Between Vermes and
ADT, who was responsible for the lack of a detection system
which might have prevented the burglary? The jury allocated
the negligence causing the burglary as follows: Apache, 48 per-
eent; ADT, 25 percent; Harry Vermes, 17 percent; Towle, 10
percent.

The trial court allocated damages among the parties as
follows:

Total Award 83% of $47,185.03 = $39,163.58
Apache: 48/78 of award = 25,847.76
ADT: 25/73 of award = 18,315.62
Towle: 0 (less negligent than plaintiff)

Apache and ADT were held jointly and severally liable for the
total award.

On appeal a number of legal issues are raised including con-
tractual limits on liability, proximate cause, intervening cause,
compromise verdict, joint and several liability, and allocation
of damages. Each of the pertinent issues will be discussed below
with reference to all relevant evidence offered at trial. They can
be summarized as follows:

(1) Did ADT owe a legal duty to Vermes other than that
arising out of its contract for services?

(2) Is Vermes’ claim against Apache barred by an exculpa-
tory provision in their lease?

(3) Was the burglary a legally sufficient intervening cause
relieving Apache of liability?

(4) Did the jury compromise the issues of liability and dam-
ages? .

ee 387

HE ADT argues on appeal that it had no duty to Vermes out-
side of the contract for services. Vermes answers that ADT’s
negligence occurred before the contract, and that since ADT “as-
sumed to act,” it must be held to the standard of a “reasonably
prudent security service company.”

This issue lies in that uncertain region between tort and con-
tract. There is no question in this case that ADT properly per-
formed the specific terms of its service contract with Vermes.
It is true that once the contract was signed ADT had “under-
taken” to provide Vermes with certain services, and failure to
do so would give Vermes a remedy in contract. Vermes’ asser-
tion, however, that “* * * [o]nce defendant undertook to pro-
vide these services, a duty to exercise reasonable care in per-
forming them arose, regardless of what the contract subsequent-
ly entered into did or did not provide with respect thereto” mis-
states the case entirely. ADT did not “undertake” anything until
the contract was signed. Prior negotiations of the parties are
merged into the written contract unless in the minds of both par-
ties an independent oral contract was intended. Donnay v. Boul-
ware, 275 Minn. 87, 144 N. W. 2d 711 (1966); Telex Corp. v.
Balch, 382 F. 2d 211 (8 Cir. 1967); Restatement, Contracts 2d,
§ 239. Prosser states:

“* * * The question appears to be * * * whether the de-
fendant’s performance, as distinct from his promise or his
preparation, has gone so far that it has begun to affect the in-
terests of the plaintiff beyond the expected benefits of the con-
tract itself, and is to be regarded, by analogy to the cases of gra~
tuitous undertaking, as a positive act assuming the obligation.”
Prosser, Torts (4 ed.) § 92, p. 618. (Italics supplied.)

In this case the record shows that while limited negotiations took
place between Vermes and ADT, these negotiations were clearly
in contemplation of signing a contract for services and were not
intended by either Vermes or ADT as an affirmative under-
taking giving rise to an obligation beyond the contract. There

38 |

is little doubt that if the contract had not been signed, no obliga-
tion would exist on the part of either party. The obligations arose
when the contract was signed and are therefore bounded by the
terms of the contract. No evidence appears on the record that
ADT acted fraudulently, nor did it hold itself out to be more than
a detection service which would supply any available system re-
quested by the customer. No prior knowledge of the problem with
Vermes’ store can be attributed to ADT. In fact, it is probable
that ADT was never aware of the problem, since it never at-
tempted to “push” a better, more expensive detection. system on
Vermes. This case involves a limited legal relationship between
two parties consisting of brief prior negotiations and a contract
which limits the liability of one to the other for failure to per-
form under the contract or for other ordinary negligence. ADT
did not assume the duty of completely evaluating.the security
needs of the Vermes store. Such a duty might have included an
investigation of the general building security as well as the
physical structure of the store. These were obligations of Vermes
himself as proprietor of the store and as an experienced jeweler
who had contracted with ADT for many years.

In short, the contract between Vermes and ADT formed the
basis of their legal relationship and placed boundaries on their
legal obligations to one another. The record shows that ADT did
not act in any manner implying an assumption of obligations be-
yond the contract, either before the contract was signed or dur-
ing performance. Hence it was under no duty to Vermes other
than to perform faithfully under the contract, which it did. Cases
involving gratuitous undertakings are clearly distinguishable.
There were no gratuitous undertakings between ADT and
Vermes, and ADT did not act beyond preparation for and per-
formance of the contract between the parties.

As we have mentioned above, logic would dictate that had
Vermes decided to contract with another burglar alarm agency,
ADT would not have been under any duty to Vermes whatso-
ever. Since there are no factual questions similar to those raised

ee 39

in The Morgan Co. v. Minnesota Min. & Mfg. Co. 310 Minn.
305, 246 N. W. 2d 443 (1976),1 there is no reason to go further
than the contract itself and the performance or nonperformance
of obligations imposed by it. We need not reach the application
of the “negligence” clause of the contract. Rather, we hold that
the court should not have submitted the interrogatory on this
issue to the jury.? We conclude that as a matter of law, based
upon this factual record, no legal duty was owed to Vermes by
ADT regarding this burglary. It seems only reasonable to con-
clude that a burglar alarm company is not an insurer that a
burglary will not happen. This crime was somewhat ingeniously
executed, and it is foreseeable that almost any detection device
or security system, no matter how modern or scientific, might
be circumvented. Such detection systems do not guarantee the
absence of crime or that all criminal attempts will fail. ADT is
therefore dismissed from this action.

I The liability of a landlord to a tenant is necessarily based
upon different considerations than that owed a tenant by a third
party with whom the tenant merely contracts for certain specific
services. The lease between Vermes and Apache contained the
following clause:

“Lessee also agrees to be responsible for and to relieve Lessor
from all liability by reason of any damages or injuries to any per-
son or thing which may arise from or be due to the use, misuse
or abuse of all or any of the elevators, hatches, openings, stair-
ways, hallways of any kind whatsoever which may exist or here-
after be erected or constructed on the said premises, or from any
kind of injury which may arise from any other cause whatsoever

1That appeal, among other things, questioned the installation of the
burglar alarm system itself.
2 “SPECIAL VERDICT
ek KK OK
“QUESTION 5: Was defendant American District Telegraph Company
negligent in failing to sufficiently advise plaintiff, Harry Vermes, as
"to the various systems of burglary detection available to him?”

40 es

on the said premises or the building of, which the demised
premises are a part, whether such damage, injury, use, misuse
or abuse be caused by or result from the negligence of Lessor,
its servants or agents or any other person or persons whatso-
ever.”

On appeal Apache contends that this clause is valid and applies
with full force to plaintiff. Vermes responds by arguing that (1)
the negligence alleged (i. e., leasing Vermes space not suitable
for a jewelry store) occurred prior to the lease, and (2) the ex-
culpatory clause may be void as against public policy, citing the
following language from Rossman v. 740 River Drive, 308 Minn.
184, 186, 241 N. |W. 2d 91, 92 (1976):

«* * * The enforceability of a lease clause which exculpates
a landlord from liability for negligence is a question of balance.
The public policy favoring freedom of contract is weighed
against the policy favoring the landlord’s observance of the par-
ticular duty he is alleged to have breached. Thus, the balance de-
pends on the nature of the particular duty breached. If the land-
lord’s duty is basic and his observance of it is of extreme impor-
tance * * *, then the policy favoring his observance of that duty
may well be stronger than the policy favoring freedom of con-
tract. * * * [I]f the duty the landlord breaches is less basic and
his observance of it is not of such grave importance * * *, then
freedom of contract may well be the dominant policy.”

The question then becomes whether the alleged duty of the land-
lord in this case is “basic.”

The duty of Apache, if it can be defined as such, was to suf-
ficiently inform Vermes concerning the store which was being
considered for rental to the extent that Vermes had enough in-
formation from which he would. be able to properly assess the
store’s suitability for his jewelry business. In the commercial
context this would seem to be a “basic” duty. A’ commercial
tenant will often have specific needs peculiar to his business
which will require the premises to be leased to have certain at-

— AL

tributes. Space suitable for a restaurant, for example, might be
completely unsuitable for a bank. A part of a building where the
air conditioning is ineffective might suit a tenant in need of stor-
age space, but could be useless for a doctor or a business office.
In cases where suitability factors might not be obvious upon
casual inspection, as with ineffective air conditioning if the
premises were inspected in winter, it would be a basic duty of
the landlord to inform the prospective tenant of any qualities
of the premises which might reasonably be undesirable from the
tenant’s point of view.

A jewery store, in addition to the usual requirements for a re-
tail store, requires physical security. The landlord’s duty, prior
to the signing of the lease, would be to point out any facts about
the premises which would tend to make them insecure; for ex-
ample, a side door accessible from the street or a thin partition
separating them from a storage room. In this case it was, in the
language of Rossman v. 740 River Drive, supra, the “particular
duty” of Apache to point out to Vermes any facts about the pro-
posed premises which might reasonably make them unsuitable
for his use. As noted by Vermes in his brief, this duty was basic
to the relationship between Apache and Vermes. It is fair to say
that if Vermes had been informed of his insecure ceiling, he
might have insisted that changes be made as conditions to the
lease. He did so as to lighting.

Thus, under the Rossman decision, the broad exculpatory
clause in the lease here should not operate to bar Vermes’ negli-
gence claim against Apache. It is not necessary to reach plain-
tiff’s other arguments on precontractual negligence, contractual
ambiguity, misrepresentation, and strict construction.

HB Apache contends on appeal that the unusual circumstances
of the burglary make it a legally sufficient intervening cause re-
lieving Apache of liability for Vermes’ losses. To succeed with
this line of argument, Apache must show that the burglary was
not “reasonably foreseeable” under the circumstances. Prosser

42,

analyzes the general problem and the specific case of criminal
acts as follows:

“Tf the intervening cause is one which in ordinary human ex-
perience is reasonably to be anticipated, or one which the defend-
ant has reason to anticipate under the particular circumstances,
he may be negligent, among other reasons, because he has failed
to guard against it; or he may be negligent only for that reason.

ee £ OK

“The same is true as to those intervening intentional or crimi-
nal acts which the defendant might reasonably anticipate, and
against which he would be required to take precautions. It must
be remembered that the mere fact that misconduct on the part
of another might be foreseen is not of itself sufficient to place
the responsibility upon the defendant. * * * But once it is deter-
mined that the defendant’s duty requires him to anticipate the
intervening misconduct, and guard against it, it follows that it
cannot supersede his liability.” Prosser, Torts (4 ed.) § 44, p. 272,
275.

As for the relative functions of court and jury, Prosser states:

“In any case where there might be reasonable difference of
opinion as to the foreseeability of a particular risk, the reason-
ableness of the defendant’s conduct with respect to it, or the nor-
mal character of an intervening cause, the question is for the
jury * * *.” Prosser, Torts (4 ed.) § 45, p. 290.

Prosser’s analysis has been followed by this court. See, Hilligoss
v. Cross Companies, 304 Minn. 546, 228 N. W. 2d 585 (1975).

One important factor in deciding foreseeability in a particular
case has been whether similar crimes have occurred prior to the
one at issue. See, Hilligoss v. Cross Companies, supra; Bass v.
City of New York, 61 Misc. 2d 465, 805 N. Y. S. 2d 801 (1969),
reversed on other grounds, 88 App. Div. 2d 407, 880 N. Y. S. 2d
569 (1972); Kline v. 1500 Massachusetts Avenue Apartment
Corp. 141 App. D. C. 370, 489 F. 2d 477 (1970). See, generally,
Annotation, 48 A. L. R. 8d 381, 335, 348. In the instant case there

| 43

was no evidence of record that crimes of a similar nature had
occurred in the Foshay Tower. Testimony offered that such
erimes had not occurred was objected to as being irrelevant, and
the trial court sustained the objection. This ruling, based upon
all the evidence produced, was error, but harmless. Previous
crimes against tenants’ property are relevant to the question of
foreseeability. As has been mentioned above, this crime occurred
in an unusual manner, and was carried out with great cleverness
and skill, considering the inaccessibility of the room over
Vermes’ store. On the other hand, it took less than 2 minutes to
reach the area over Vermes’ vault once the access door was
preached. Other factors were overall building security, an al-
legedly locked security door between the main floor and the ac-
cess room, and the free use of pass keys by building employees.

On the whole it is difficult to say that there could not be a rea-
sonable difference of opinion on the foreseeability of the bur-
glary. The jury found that the criminal act in this case was fore-
seeable by Apache, considering all the circumstances. This find-
ing is not clearly contrary to the evidence, and thus should not
be disturbed on appeal.

HM Although the only evidence of damages at trial showed
that Vermes’ total out-of-pocket loss (i. e., wholesale value of
goods stolen) was $47,185.03, the jury, after allocating negli-
gence among all of the parties, awarded Vermes $23,000. On
post-trial motion by Vermes, the trial judge raised the damages
to $47,185.03. ADT asserts on appeal that the jury verdict was
a compromise between liability and damages, while Vermes coun-
ters that the jury merely confused retail value with wholesale
costs. ADT points out that $23,000 is approximately 48 percent
of $47,185.03, that being the percentage of negligence attributed
to Apache. It suggests that this might be explained by the jury
desiring to give Vermes only the damages attributable to the
“most negligent” defendant.

From the evidence in the record it is difficult to say more than
the trial judge said in revising the award. He stated that it was

44 a

“unsupported by and contrary to the evidence.” Since the jury
apparently took some care to arrive at the exact negligence per-
centages, it does not appear that it was attempting to give
Vermes only damages attributable to the “most negligent” de-
fendant. This could have been done by finding that ADT and
Towle had committed no negligence, and holding Vermes just less
than 50 percent negligent. Such was clearly not the jury’s intent.
In view of a lack of any evidence to the contrary, it must be as-
sumed that the jury simply misunderstood the proof of damages
at trial, and thus gave an insufficient award which was properly
revised by the trial court.

Since this court’s opinion coupled with the jury verdict results
in the retention of only one defendant, discussion of further is-
sues raised becomes unnecessary. This places Apache in the
position many defendants who are jointly liable find themselves
in when the liability of codefendants is eliminated by a finding
of a lesser percentage of comparative negligence than that of the
plaintiff. We therefore order judgment to be entered for $39,-
163.58 (83 percent of the damages of $47,185.03) in favor of
Vermes against defendant Apache.

Reversed in part, affirmed in part, and remanded with instruc-

tions.
a

STATE v. DIANE MARIE CLARK.
STATE v. JIMMIE FRANCIS PAVELKA.

250 N. W. 2d 199.

January 21, 1977—Nos. 46056, 46070.

O'Connell & Thuet and William F. Thuet, for appellant Clark.

Collins & Buckley and Farl P. Gray, for appellant Pavelka.

Warren Spannaus, Attorney General, John O. Sonsteng, Coun-
ty Attorney, and Thomas F. VanHorn, Assistant County At-
torney, for respondent.

Heard before Sheran, Peterson, and Scott, JJ., and considered
and decided by the court en bane.

Scort, JUSTICE.

These are consolidated appeals from judgments of the Dakota
County District Court convicting Jimmie F. Pavelka and Diane
M. Clark of unlawful possession of controlled substances. On ap-
peal defendants dispute the findings of the district court follow-
ing a Rasmussen hearing on suppression of evidence. The case
centers on the legality of the warrantless arrests of the defend-
ants, pursuant to which evidence leading to their convictions was
seized. Appellants seek suppression of seized evidence and ask
that their convictions be set aside.

At about 6 p.m. on February 4, 1975, Officer Alan Larsen of
the South St. Paul Police Department received by telephone a
tip from a reliable informant that narcotics would be purchased.
that evening from Jimmie Pavelka at his apartment in Inver

46 Es

Grove Heights. At 6:30 p.m. Larsen received a second call from
the informant and was told that Pavelka was out picking up the
drugs and would return home later to make the sale.

Larsen set up surveillance of the Pavelka apartment beginning
at 8 p.m. Pavelka returned home about 10:30 p.m., entered his
apartment, returned to his car and appeared to remove a package
from it, and then reentered his apartment. At about 10:50 p.m.
two other individuals, Wayne Zamen and Craig Christiansen,
also named by the informant, arrived by car at Pavelka’s apart-
ment. They left at about 11:30 p.m. and were followed by Larsen
in an unmarked squad car. The vehicle driven by Zamen was
stopped by a marked squad car assisting Larsen about one mile
from the Pavelka apartment and its five occupants were placed
under arrest. A pat-down search of Christiansen revealed a
syringe containing a small amount of a liquid. A search of the
car turned up a small plastic packet believed by Larsen to con-
tain phencyclidine, a Schedule III controlled substance. The oc-
cupants of the car were taken to the South St. Paul police station
and booked.

Larsen and his fellow officer, Sergeant Curtis Nielson, re-
turned to Pavelka’s apartment at about midnight, and were met
by three other officers from the Inver Grove Heights Police De-
partment. Larsen obtained a passkey to Pavelka’s apartment
from the apartment complex manager and proceeded to Pavelka’s
door with three of the officers, At the Rasmussen hearing, Lar-
sen testified as follows:

“Q. And I believe that you said you knocked on the door?

“A. Yes, Sir.

“Q. How many times did you knock?

“A. At least twice, I believe, three times.

“Q. When you say ‘Three times’, was it three times in suc-
cession or did you wait for awhile and knock again?

“A. No, Sir. There was a pause in between each knock. It
wasn’t one knock, it was several raps, a pause, several raps
again,

De AT

“Q. When you say ‘Several raps’, was this a soft knocking
or did you do it fairly loud?

“A, No. It was very loud.

“Q. Did you do it with your fist?

“A. I did.
“Q. And the other Officers were there?
“A, Yes.

“Q. What were you saying while you were knocking on the
door?

“A. ‘This is the Police Department, would you open up?”

“Q. At that point what was your intent, Officer?

“A. Our intent was to arrest Mr. Pavelka for the possible
sale of Controlled Substance.

“Q. How many times, would you say, did you say the Police
were outside, open up?

“A. Each time we rapped.

“Q. And were you the one that was doing, you know, doing
the talking?

“A, Yes, Sir.

“Q. The other Officers, were they saying anything at that
point that you can remember?

“A. I don’t believe so.

“Q. How long would you have been standing outside the
door? How long did this take, do you think?

“A. Approximately a minute. Just an estimate.

“Q. Did anybody come to the door?

“A. No, Sir.
“Q. Did you hear anything inside?
“A, No.

“Q. Did you hear anybody responding to the knock on the
door?

“A, No.

“Q. Could you see anything inside the apartment?

“A. No, Sir. :

“Q. What did you do then, Officer?

48

“A. Inserted the passkey and opened the door, walked into
the entryway right in front of the door. It was actually part of
the living room.”

The lights were turned on and Larsen called out Pavelka’s name
three times. Pavelka walked out of the bedroom, nude and ap-
pearing to be groggy from sleep. Larsen placed Pavelka under
arrest for sale of a controlled substance. Diane Clark was dis-
covered in the bedroom in bed; she was also placed under arrest.
Sometime during the arrest procedure Sergeant Nielson seized
a glass jar of suspected marijuana and two plastic packets con-
taining suspected phencyclidine which he observed in “plain
view” on the coffee table in the living room. Pavelka and Clark
were taken to the South St. Paul police station and booked for
unlawful possession of controlled substances and for unlawful
possession with intent to sell a controlled substance.

At 5:20 a.m. on February 5, 1975, Larsen obtained a search
warrant for Pavelka’s apartment, which was executed at 5:30
a.m. Additional illegal drugs were seized pursuant to this search.
A search of Diane Clark’s purse at the Dakota County jail re-
vealed a quantity of phencyclidine.

At the Rasmussen hearing the court refused to suppress evi-
dence seized at the time of the arrests, and in subsequent
searches of Pavelka’s apartment and Clark’s purse. At trial,
Pavelka was found guilty on two counts of unlawful possession
of controlled substances; Clark was found guilty on one count
of unlawful possession of a controlled substance.

It is obvious that defendant Clark’s arrest was unlawful. With-
out an extensive analysis of criminal and constitutional law, the
facts clearly show that the police had no information that she
was in any way involved until she was discovered in bed in de-
fendant Pavelka’s apartment. Certainly at that time there was
a complete absence of probable cause to arrest Clark. She was
convicted for the possession of the phencyclidine found in her
purse while illegally being held at the Dakota County jail. It is
clear that under the “fruits of the poisonous vine” doctrine this

as 49

evidence must be excluded. A person cannot be arrested and
searched merely because he is found in suspicious circum-
stances.1 We therefore reverse defendant Clark’s conviction.

Pavelka also raises the issue of the legality of his arrest. He
further contests the legality of the search of his apartment at
the time of his arrest and of the subsequent search pursuant to
the search warrant.

It should first be stated that the legality of both the search in-
cidental to the arrest and the later search pursuant to the war-
rant necessarily depends in the first instance upon the legality
of the arrest itself. The objects seized during the original search
clearly satisfy the “plain view” doctrine,? and the basis for the
search warrant rests upon the items seized during the search in-
cidental to the arrest. From the facts presented, if the arrest was
lawful, so were both of these searches. We will therefore examine
whether the arrest was valid on either statutory or constitu-
tional grounds. There was no dispute at the Rasmussen hearing
as to the reliability of the informant or that there was probable
cause sufficient to arrest Pavelka for the sale of narcotics, It
should also be noted that Pavelka stipulated to the constructive
possession of controlled substances.

Pavelka strenuously questions whether there was proper com-
pliance with Minn. St. 629.84. The relevant parts of § 629.84
provide:

“A peace officer may, without warrant, arrest a person:

ese ee Oe

“(3) When a felony has in fact been committed, and he has
reasonable cause for believing the person arrested to have com-
mitted it;

+ 8 eek

1See, State v. Fox, 283 Minn. 176, 168 N. W. 2d 260 (1969); State v.
Fish, 280 Minn. 163, 159 N. W. 2d 786 (1968).

2See, Coolidge v. New Hampshire, 403 U. S. 443, 91 S. Ct. 2022, 29
L. ed. 24. 564 (1971).

50 ee

“To make such an arrest, the officer may break open an outer
or inner door or window of a dwelling house if, after notice of
his office and purpose, he shall be refused admittance.”

It is not disputed that entry by means of a passkey constitutes
a “breaking” under the statute. The issue thus narrows to
whether there was an announcement of purpose and a refusal
of admittance. There are several exceptions to the strict require-
ments of the “knock and announce” rule of § 629.34, developed
in Federal cases interpreting 18 USCA, § 3109,3 which should
be discussed in relation to the facts of this case. Two of these ex-
ceptions are (1) the “useless gesture” or “senseless ceremony”
rule and (2) the “possible destruction of evidence” rule. The
United States Supreme Court has stated that the “useless ges-
ture” rule requires that “the facts known to officers would jus-
tify them in being virtually certain” that the occupant of the
dwelling “already knows their purpose so that an announcement
would be a useless gesture.” Miller v. United States, 357 U. S.
301, 310, 78 S. Ct. 1190, 1196, 2 L. ed. 2d 1382, 1838 (1958). In
Bosley v. United States, 188 App. D. C. 268, 426 F. 2d 1257
(1970), the United States Court of Appeals for the District of
Columbia Circuit permitted an unannounced, non-forcible entry
through an open door after officers had observed the defendant
sleeping within and were unable to wake him by knocking. The
court found that “[s]ince appellant had not been awakened by
their knocking, the officers could reasonably have concluded that
further knocking or verbal announcement would be a ‘useless
gesture.’” We certainly agree, under the present factual setting,
that any further statement by the police would have been a “use-
less gesture” or a “senseless ceremony.”

From the peace officers’ point of view, it would seem naive

818 USCA, § 3109 provides: “The officer may break open any outer or
inner door or window of a house, or any part of a house, or anything
therein, to execute a search warrant, if, after notice of his authority and
purpose, he is refused admittance or when necessary to liberate him-
self or a person aiding him in the execution of the warrant.”

Es 51

to suggest that Pavelka, who had undoubtedly been dealing in
drugs for some time and had just concluded several sales, would
not know why the police, upon announcing who they were, were
pounding loudly on his door. This relatively recent and expand-
ing phenomenon of opening up one’s residence as a place for il-
legal commercial drug trade,‘ where it would be expected that
possibly dangerous drug users and addicts would frequent it and
where the “pusher” himself is often dangerous, surely requires
law enforcement officers to move rapidly and with great care
in anticipation of danger in performing their necessary duties.®
Further, it is well-known to law enforcement authorities that
drugs can rapidly be destroyed by simply flushing them down
a toilet or by other means. Thus, it is incumbent upon the police,
having established probable cause, to arrest the perpetrator of
such sales and confiscate the remainder of the drugs, in order
to be able to establish at trial the fact that this was the defendant
who had possessed and sold the drugs.

To suggest that an arrest warrant should have been obtained
in such a situation is unrealistic and would, at the least, revolu-
tionize law enforcement procedures. The present nationwide pro-
cedure for obtaining a warrant, almost without exception, is to
present evidence to the prosecuting attorney for his careful study
and conclusions as to which penal statutes have been violated.
The entire situation here developed rapidly between 6 p.m. and
midnight. Every item reported by the reliable informant was
verified. There were arrests of the actual buyers. At the time
of Pavelka’s arrest he still had possession of the drugs from the
package that he had been seen carrying into his apartment. This
evidence had to be secured rapidly. The police had ample
probable cause and no possibility of obtaining a warrant through
the prosecutor’s office until morning, at which time it is con-
stitutionally required that the facts constituting probable cause

4See, Lewis v. United States, 385 U. S. 206, 87 S. Ct. 424, 17 L. ed. 2d
812 (1966).
5 See, State v. Bitterman, 304 Minn. 481, 232 N. W. 2d 91 (1975).

52 es

be presented under oath and affirmation to a detached magis-
trate for his consideration. Under the facts and the good police
practices exercised in this case, to hold that the police did some-
thing so statutorily or constitutionally unreasonable that the evi-
dence should be excluded would be unrealistic and of no future
instructive value in our difficult and questionable role in policing
the police.

Pavelka further claims that in the absence of exigent circum-
stances peace officers may not effect a valid arrest by warrant-
less entry into a dwelling place. In United States v. Watson, 423
U. S. 411, 96 S. Ct. 820, 46 L. ed. 2d 598 (1976), Mr. Justice
Stewart, in his concurring opinion, seems to express the general
conclusion of the case in this area by stating:

“The Court does not decide, nor could it decide in this case,
whether or under what circumstances an officer must obtain a
warrant before he may lawfully enter a private place to effect
an arrest. See Gerstein v. Pugh, 420 U. S. 103, 118 n. 18, 95
S. Ct. 854, 868, 43 L. ed. 2d 54; Coolidge v. New Hampshire, 403
U.S. 448, 474-481, 91 S. Ct. 2022, 2042-2046, 29 L. ed. 2d 564;
Davis v. Mississippi, 394 U. S. 721, 728, 89 S. Ct. 1894, 1898, 22
L, ed. 2d 656; Jones v. United States, 357 U. S. 498, 499-500, 78
S. Ct. 1258, 1257-1258, 2 L. ed. 2d 1514.”

Pavelka’s claims seem speculative to say the least, but assuming’
that exigent circumstances are required, it is a well-known fact
in narcotics cases that drugs are often easily destroyed, there-
fore, that possibility along with all the other circumstances of
this case would appear to provide the required exigent circum-
stances. Ker v. California, 374 U.S. 28, 83 S. Ct. 1623, 10 L. ed.
2d 726 (1963).

We therefore conclude that this factual setting discloses that
both the statutory and constitutional standards have been com-
plied with, and the conviction of Pavelka is therefore affirmed.

Reversed as to the conviction of Clark; affirmed as to the con-
viction of Pavelka.

ee 53

Mr. JUSTICE ROGOSHESKE took no part in the consideration or
decision of this case.

STATE EX REL. BRIAN ALLEN
EAGLE v. DONALD J. OMODT.

250 N. W. 2d 596.

January 21, 1977—No, 46535.

William R. Kennedy, Hennepin County Public Defender, and
Wright S. Walling and Gerard Snell, Assistant Public Defenders,
for appellant.

Warren Spannaus, Attorney General, Gary W. Flakne, County
Attorney, Vernon E. Bergstrom, David W. Larson, and Phebe
Haugen, Assistant County Attorneys, and Lee Barry, Law Clerk,
for respondent, County Sheriff.

Heard before Rogosheske, Peterson, and Scott, JJ., and con-
sidered and decided by the court en banc.

Scorr, JUSTICE.

This is an appeal from a denial of a juvenile’s petition for a
writ of habeas corpus. We affirm.

On January 81, 1975, a delinquency petition was filed in the
Hennepin County District Court, Juvenile Division, alleging that

54

Brian Allen Eagle had committed the offense of aggravated rob-
bery. The matter was transferred to the Mille Lacs County
Juvenile Court. By order of that court, the state’s motion for
reference of the juvenile for prosecution as an adult was granted.
Minn. St. 260.125. Upon appeal to the Mille Lacs County District
Court, the order for reference was affirmed on the record alone.

The Hennepin County Attorney issued a formal complaint on
November 5, 1975, charging the juvenile with aggravated rob-
bery in violation of Minn. St. 609.245 and Minn. St. 1974,
§ 609.11. The juvenile moved the Hennepin County District Court
to dismiss the complaint upon the basis that he had been denied
a trial de novo in the district court as required by Minn. St.
260.291, subd. 2(b). The motion to dismiss was denied. The ju-
venile then petitioned the Hennepin County District Court for
a writ of habeas corpus. The instant appeal is from the denial
of that petition.

The sole issue presented is whether Minn. St. 487.89, providing
for an appeal from the county court to the district court on the
record alone, supersedes Minn. St. 260.291, subd. 2(b), and gov-
erns all appeals from juvenile county courts! to the district
courts.

Minn. St. 487.39 provides as follows:

“Subdivision 1. An aggrieved party may appeal to a district
court judge from a determination of a county court. The provi-
sions of this section govern all appeals from the county court;
appeal provisions of all other statutes are inapplicable except
as stated in subdivision 3.

x Fe ROE

“Subd. 2. The appeal shall be confined to the typewritten rec-

ord. * * *

1 Exceptions to the designation of the county court as the juvenile
court are contained in Minn, St. 260.021. In those enumerated counties
in which the district court is the juvenile court, all appeals therefrom
are governed by Minn. St. 260.291. In re Welfare of I. Q. S., 809 Minn.
78, 82, 244 N. W. 2d 30, 35 (1976).

— 55

“Subd. 8. Notwithstanding the provisions of subdivisions
1 and 2, an appeal from a determination of the county court in
a case in which the presiding judge or judicial officer was not
learned in the law shall be to the district court under the provi-
sions of law now governing appeals from probate court and the
case shall be heard de novo.”

The comparable section of the Juvenile Court Act, Minn. St.
260.291, subd. 2(b), sets forth the procedure to be employed upon
appeal as follows:

“The appeal from a probate-juvenile court is taken to the dis-

trict court which shall try the case de novo. An appeal in the dis-
trict court de novo action may be taken to the supreme court in
the same manner as an appeal is taken from a district court
juvenile court.”
As it is clear that the county court judge was “learned in the
law” within the meaning of Minn. St. 487.39, subd. 3, the sole
consideration is whether the two facially conflicting statutes are
capable of compatible existence.

We had occasion to consider a similar problem in In re Estate
of McCarthy, 297 Minn. 518, 211 N. W. 2d 170 (1973), when
faced with an apparent inconsistency between the appeal provi-
sion of the County Court Act, Minn. St. 487.89, and the preexist-
ing statutory procedure providing for a trial de novo in the dis-
trict court upon appeal from a probate county court pursuant
to Minn, St. 1974, § 525.72. We concluded that § 487.89 super-
seded § 525.72, thereby limiting appeals to the district court in
those instances to the written record.

Although a contrary conclusion was reached in State, Depart-
ment of Public Safety, v. Hanson, 300 Minn. 429, 221 N. W. 2d
120 (1974), the principles upon which we relied are determina-
tive of the issue involved herein. In Hanson, the state challenged
the trial by jury de novo procedure being employed by district
courts upon appeal from orders of the county court sustaining
drivers’ license revocations under Minn. St. 169.128. It argued

56 Ee

that the matter must be reviewed on the typewritten record
alone in accordance with Minn. St. 487.39. We concluded that
the failure of the County Court Act to specifically refer to the
implied-consent law was indicative of a legislative intent that
the county court derive its jurisdiction over license-revocation
proceedings exclusively from the implied-consent law. Minn. St.
169.128. The appeal procedure in these matters was thus held
to be governed exclusively by that act.

Applying the McCarthy and Hanson rationale to the instant
matter, we conclude that if the county court derives its specific
jurisdiction from the County Court Act, as in McCarthy, the
provisions of Minn. St. 487.39 govern appeals; when the jurisdic-
tion of the county court is derived from an independent statute
neither mentioned by nor incorporated into the County Court
Act, as in Hanson, the procedures contained within that separate
statute must control all appeals. Since the County Court Act ex-
pressly grants to the county courts exclusive jurisdiction in all
juvenile matters, Minn. St. 487.14(b), the procedure which limits
appeals to the district court to review on a. typewritten record,
‘rather than by a trial de novo, was properly employed.

Pursuant to Minn. St. 480.055, subd. 1, 484.88, and 484.52 and
Rule 83, Rules of Civil Procedure, a number of judicial districts
have formulated appellate rules which would allow consideration
of appeals from county courts by three-judge panels.2 Our
knowledge of this appellate procedure indicates that it provides
an obvious advantage in drawing upon the capabilities and
judicial experience of three members of the district court. We
therefore urge each of the judicial districts to study the feasibil-
ity of instituting this procedure.

Affirmed.

2See, eg., Third Judicial District Rule 3; Fifth Judicial District Rule
15(4); Sixth Judicial District Rule 29(3); and Ninth Judicial District
Rule 14.02.

— 57

JANET 8. LUTZ v. LILYDALE GRAND
CENTRAL CORPORATION.

250 N. W. 2d 599.

January 21, 1977—No. 46005.

Carroll, Cronan, Roth & Austin, Michael C. Tierney and John
A. Doyle, for appellant.
Sax & Dove and Roger D. Sax, for respondent.

PER CURIAM.

This is an appeal by defendant, Lilydale Grand Central Cor-
poration, from the order of the Dakota County District Court
denying its alternative motion for judgment notwithstanding
the verdict or for a new trial. We affirm.

Plaintiff, Janet Lutz, sustained injuries to her right elbow
when she fell in the parking lot adjacent to the Lilydale Grand
Central Shopping Center. The instant action was commenced
to recover medical expenses and damages based upon defendant’s
negligent maintenance of the parking facility. By way of special
verdict, the jury found that defendant was 100 percent causally
negligent and awarded damages to plaintiff in the amount of
$26,000.

58 |

Defendant asserts as error (1) the sufficiency of the evidence
to support the jury finding that defendant was 100 percent
causally negligent; (2) the admission of a statement by the treat-
ing physician recounting plaintiff's version of the events leading
to the accident as related to him; and (8) that the jury verdict
was induced by passion and prejudice resultant of the improper
closing remarks of plaintiff’s counsel.

1. The record reveals testimony of the plaintiff that upon
her arrival at the shopping center, she was aware that negligible
snowfall had occurred during that morning and that she noticed
scattered ice accumulations throughout the parking lot. Although
she could not specifically recall seeing ice on the spot where her
fall occurred, she did note that the existence of ice was fully ap-
parent and that as a result she exercised great care in traversing
the parking lot.

Defendant, while introducing a climatological data report to
show the very negligible snowfall and accumulation, was unable
to specifically controvert plaintiff’s testimony regarding ice ac-
cumulation. Rather, it did generally relate its standard procedure
of removing snow or sanding the premises immediately after a
snowfall had occurred.

Viewing the evidence as a whole and in a light most favorable
to the prevailing party, a jury determination as to proximate
cause will stand unless manifestly and palpably contrary to the
evidence. Ramirez v. Miska, 304 Minn. 4, 228 N. W. 2d 871
(1975) ; Belden Porter Co. v. Kimball Co., Inc. 303 Minn. 98, 226
N. W. 2d 310 (1975). On the basis of the circumstances surround-
ing the incident, the jury was entitled to infer that the fall was
the result of plaintiff’s slipping on ice in the parking lot. Despite
defendant’s contention that the verdict was based upon mere con-
jecture or speculation, the inference in support of the verdict
reasonably outweighs and preponderates over other conflicting
theories or inferences. Smith v. Kahler Corp., Inc. 297 Minn. 2°72,
211 N. W. 2d 146 (1978); Knuth v. Murphy, 287 Minn. 225, 54
N. W. 2d 771 (1952).

es 59

2. Defendant then challenges the admissibility of testimony:
by plaintiff’s treating physician regarding a statement made to
him and included in the hospital records. Upon examination at
the hospital after the accident, the plaintiff stated that she had
“fallen on ice.” Defendant contends that the statement is incon-
sistent with plaintiff's testimony at trial, that it lacked the
spontaneity required for its reliability, and that it was wholly
unrelated to treatment of the injury.

We need not pass upon the propriety of the admission of this
statement, for if it was error, it, when considered within the
cumulative evidence, falls within the classification of harmless
error. In re Estate of Lea, 301 Minn. 258, 222 N. W. 2d 92
(1974).

8. Defendant finally contends that inappropriate remarks
of plaintiff’s counsel, misstating the law and misinterpreting
the facts, influenced the jury beyond acceptable limitations. A
review of the record leads us to conclude that this assertion of
error is without merit.

Affirmed.

Le
JOAN TOETSCHINGER, INDIVIDUALLY AND AS
PARENT AND NATURAL GUARDIAN OF PAUL

TOETSCHINGER, A MINOR, v. THOMAS
THNOT AND ANOTHER. .

250 N. W. 2d 204.

January 27, 1977—No, 44574.

Jardine, Logan & O’Brien and Michael J. Healey, for appel-
Jants.

es 61

Murnane, Murnane, Battis & Conlin, Thomas M. Conlin, and
James J. Boyd, for respondents.

ee

SHERAN, CHIEF JUSTICE.

Appeal from a judgment of the district court of Ramsey
County entered in favor of defendants following an action for
damages caused by an automobile accident. We affirm.

On Monday, April 8, 1972, at about 2:35 p. m., Paul Toet-
schinger, then 5 years and 8 months of age, sustained injuries
when struck by an automobile owned by defendant Thomas Ihnot
and operated with his permission and consent by his wife, de-
fendant Candyce M. Ihnot. The collision occured near the “T”
intersection where Eleventh Avenue in the Village of Maplewood
meets White Bear Avenue, a protected thoroughfare. White Bear
Avenue, a four-lane highway about 50 feet wide, extends in a
northerly and southerly direction through the Village of Maple-
wood. Eleventh Avenue extends from it in an easterly direction
and, including a median strip, is about 80 feet wide. These streets
are relatively straight and level near the area of the accident.
There are no sidewalks at or near the intersection, and no cross-
walk markings for pedestrians. A: Montgomery Ward & Co.
storage facility surrounded by a parking area is located below
street level and to the south and west of the intersection. An en-
tranceway leading to it branches off from White Bear Avenue
at a point about 35 feet south of the south curb line of Eleventh
Avenue extended. Except for a few houses located south of
Eleventh Avenue and east of White Bear Avenue, there are no
residential or other structures in the immediate area of the ac-
cident. At the time of the accident the concrete surface of White
Bear Avenue was dry and the weather was not inclement.

As the Thnot car approached the “T” intersection from the
north in the easterly south-bound lane of White Bear Avenue,
Paul Toetschinger was standing between his sisters, Anne and
Mary, 11 and 10 years of age, in the grass near the east curb line

62

of White Bear Avenue, about 20 feet south of the south curb line
of Eleventh Avenue. Susan Wilke, a 9-year-old friend, was with
them. They were returning to their home, situated southwest of
the Montgomery Ward parking lot, from a shopping trip to a
Target store located about 83 blocks east of White Bear Avenue.
Laurie and Julie Johnson, 9 and 7 years of age, who went with
them to the Target store, had crossed White Bear Avenue and,
apparently, were proceeding into or down the entranceway to
the Montgomery Ward parking area.

As defendant Candyce M. Ihnot, 23 years old at the time of
the accident, approached from the north on White Bear Avenue,
she was driving a 1965 Chevrolet Impala at a speed which she
estimated to be about 35 miles per hour. She was in a posted 45-
miles-per-hour zone. With her in the front seat were her sister,
Jacqueline Gavin, an adult, and two infants. When they were
about 80 to 100 feet north of the intersection, Mrs. Ihnot recog-
nized that the four persons standing just to the east of the curb
of White Bear Avenue and southeast of the intersection were
children. The Johnson girls were not in sight. There were no cars
parked in the area to obscure her vision and there were no dis-
tracting circumstances. Mrs. Ihnot’s reaction was to withdraw
her foot from the gas pedal, but she did not otherwise change
her course or brake her speed. The children appeared to be in a
position of safety and she assumed that they would remain there.
But, just as she entered the intersection, she observed Paul sud-
denly leave the other children, running head down toward the
west side of White Bear Avenue. Mrs. Ihnot applied her brakes
and attempted to turn the vehicle to her right. She brought her
car to a stop facing in a southwesterly direction about 100 feet
south of the north curb line of Eleventh Avenue extended, with
all but the front right portion of it at rest in the more easterly
portion of the southbound lane of White Bear Avenue. Seventy-
three feet of tire marks were later observed extending northerly
from its front wheels where it had come to a stop. Just before
she was able to bring her automobile to a stop, it collided with

— 63

Paul Toetschinger near the point of juncture of its left front
fender and its bumper. He fell to the street, where he was ob-
served near the front left door of the car by Mrs. Ihnot after she
had stopped and stepped from it to give him aid. His mouth was
injured and he had sustained a fractured femur of his right leg.

The six-person jury returned a special verdict, finding that
the accident was caused by the negligence of Paul Toetschinger
to the extent of 80 percent and by the negligence of Candyce
Thnot to the extent of 20 percent. Paul’s damages were fixed at
$2,500 and those of his mother at $6,600.

Post-trial motions were denied; judgment was entered for de-
fendants, and this appeal was taken.

On this appeal it is contended:

(1) The finding of 80-percent negligence attributable to Paul
Toetschinger cannot be sustained by the evidence;

(2) The trial court erred in giving the following instruction
to the jury:

“A person confronted with an emergency through no negli-
gence of his own, or her own, who, in an attempt to avoid the
danger, does not choose the best or safest way is not negligent
because of such choice unless the choice was so hazardous that
a reasonable person would not have made it under like circum-
stances.”

(8) The trial court erred in failing to give an instruction
specifically concerning knowledge of the presence .of children
as a circumstance affecting the duty to use reasonable care;

(4) The trial court erred in failing to instruct the jury pur-
suant to Minn. St. 169.14, subd. 2, concerning maximum speed
limits ;

(5) The damages returned were insufficient as a matter of
law.

HM Although Paul Toetschinger was only 5 years and 8
months of age at the time of the accident, his negligence was

64 —

properly submitted to the jury by the trial court, which in-
structed:

“In the case of a child, reasonable care is that care which a rea-
sonable child-of the same age, intelligence, training and experi-
ence as Paul Toetschinger at the time of the accident would have
used under like circumstances.”

The submission of the issue, and the instruction as given, accords
with the uniform holding of this court. See, Rosvold v. Johnson,
284 Minn. 162, 169 N. W. 2d 598 (1969); Pelzer v. Lange, 254
Minn. 46, 98 N. W. 2d 666 (1958) ; Bruno v. Belmonte, 252 Minn.
497, 90 N. W. 2d 899 (1958) ; Watts v. Erickson, 244 Minn. 264,
69 N. W. 2d 626 (1955) ; Audette v. Lindahl, 231 Minn. 239, 42
N. W. 2d 717 (1950); Eckhardt v. Hanson, 196 Minn. 270, 264
N. W. 776, 107 A. L. R. 1 (1936).

Plaintiffs urge that under the Minnesota rule the defendant
must establish the level of a child’s capacity as a precondition
for the submission of the issue of contributory negligence. In this
ease, evidence was offered to show that Paul Toetschinger’s men-
tal and physical characteristics were like those of other children.
of his age, although he may have been more impulsive, immature
and hyperactive than others. His experience with the dangers
of traffic were limited, perhaps, but no more so than one would
anticipate on the basis of his age. He had attended kindergarten
but was apparently not considered ready for the first grade. We
do not believe the situation to be different from that controlled
by the authorities cited. We have given consideration to the ad-
visability of adopting the rule, in force in some states, that child-
ren under the age of 7 years cannot be held contributorily negli-
gent, and we have concluded that the rule to which we adhere
has been so long and firmly established as to make abandonment
of it at this time under the facts of this case inadvisable.

It is of course true, as stated in the dissenting opinion, that
principles of stare decisis should not preclude changes. which ad-
vance the administration of justice. But with respect to the prob-

Es 65

lem before us, it is submitted that to reject our present rule con-
cerning the contributory negligence of children in favor of an
arbitrary declaration that children under the age of 7 years are
incapable of exercising due care for their own safety would, in
accordance with the analysis that follows, be unwise.

In Eckhardt v. Hanson, 196 Minn. 270, 272, 264 N. W. 776,
777, 107 A. L. R. 1, 2 (1986), the Illinois rule preferred by the

dissenting opinion and the Massachusetts rule now in effect in
this state were compared in this way:

«* * * Under the so-called Illinois rule (which is analogous
to the common law rule with respect to the nonresponsibility of
such young children for criminal acts), it is held that a child
under seven is incapable of contributory negligence. * * * This
rule has the merit of being easy to apply. However, it is arbi-
trary and always open to the objection that one day’s difference
in age should not be the dividing line as to whether a child is
capable of negligence or not. Courts following the Massachusetts
rule hold that the question of contributory negligence of a child
under seven years of age is for the jury under proper instruc-
tions, * * *

ee RK

“Under a proper instruction the Massachusetts rule is the
more sound and the one most likely to insure just result. It does
not cast upon the general public any and all risks that may be
created by the carelessness of a child. Still it does not go so far
as to hold a child to a degree of care not commensurate with its
age and experience. Under present-day circumstances a child of
six is permitted to assume many responsibilities. There is much
opportunity for him to observe and thus become cognizant of the
necessity for exercising some degree of care. Compulsory school
attendance, the radio, the movies, and traffic conditions all tend
to have this effect. Under the Illinois rule a child may be guilty
of the most flagrant violation of duty and still not be precluded
from recovering damages for injuries suffered partly because

66 ee

of such violation. The Massachusetts rule contemplates justice
for all parties, irrespective of age. Jurors, by virtue of their of-
fice, are competent to judge whether or not a child has exercised
a degree of care commensurate with its age, capacity, and under-
standing. The Illinois rule has no basis in sound reason or logic.
It is based upon an outworn historical rule of criminal law which
refused to acknowledge any capacity on the part of any child
under seven years of age to distinguish between right and
wrong.” (Italics supplied.)

In Squillace v. Village of Mountain Iron, 223 Minn. 8, 18, 26
N. W. 2d 197, 201 (1946), this court approved the following in-
struction with respect to the contributory negligence of a 6-year-
old child:

««« ® * Young people are not held to the same degree of care
for their own safety as an adult person, but a child of six years
of age is required to use some care for his own safety but is only
held to the degree of care that is commonly used by children of

. like age and capacity.”

In Audette v. Lindahl, 231 Minn. 239, 242, 42 N. W. 2d 717,
719 (1950), the authority of the trial court to decline to submit
the issue of contributory negligence of a 5-year-old child to the
jury in a proper case was recognized when we said:

“ % * OF course, the facts of a particular case, unlike those
here, may preclude the submission of an issue of contributory
negligence.”

And in Watts v. Erickson, 244 Minn. 264, 269, note 2, 69 N. W.
2d 626, 629, note 1 (1955), we added:

“ee * * A child may be so young as to be manifestly in-
capable of exercising any of those qualities of attention, intel-
ligence and judgment which are necessary to enable him to per-
ceive a risk and to realize its unreasonable character.’ Restate-
ment, Torts, § 283, comment e.”

EE 67

Although scholars are not in agreement on the question,’ the
authorities generally considered particularly reliable by this
court have indicated that the rule now in effect in Minnesota is
to be preferred to the rule favored in the dissenting opinion. In
Prosser, Torts (4 ed.), § 32, we find this statement:

“Some courts have attempted to fix a minimum age, below
which the child is held to be incapable of all negligence. * * *
Below the age of seven, the child is arbitrarily held to be in-
capable of any negligence * * *. The great majority of the
courts have rejected any such fixed and arbitrary rules of de-
limitation, and have held that children well under the age of
seven can be capable of some negligent conduct. Undoubtedly.
there is an irreducible minimum, probably somewhere in the
neighborhood of four years of age, but it ought not to be fixed
by rules laid down in advance without regard to the particular
case. As the age decreases, there are simply fewer possibilities
of negligence, until finally, at some indeterminate point, there
are none at all.”

In 2 Harper and James, Torts, § 16.8, it states:

“The question of how old a child may be and yet have his im-
maturity considered does not give much trouble under the pre-
vailing American doctrine which treats the matter as one of
degree to be worked out in each case where the plaintiff is
technically a minor under its individual circumstances. While
theoretically there is no age at which contributory negligence is
impossible, the universal view is to set an age below which a child

1 See, Verni v. Johnson, 295 N. Y. 436, 68 N. HB. 2d 431 (1946); Benning
v. Schlemmer, 57 Ohio App. 457, 14.N. HE, 2d 941 (1937); Keet, Contribu-
tory Negligence of Children, 12 Cleveland-Marshall L. Rev. 395; Starnes,
Contributory Negligence of a Minor as a Matter of Law in Missouri,
1959 Wash. U. L. Q. 281; Wilderman, Presumptions Existing in Favor
of the Infant in Re: The Question of an Infant’s ‘Ability to be Guilty of
Contributory Negligence, 10 Ind. L. J. 427; Wilkens, Contributory Neg-
ligence of Very Young Children, 20 Cleveland St. L. Rev. 65; Note, 34
Ind. L, J. 511; Note, 22 N. ¥. U. L. Q. Rev. 131; Note, 18S. C. L. Rev. 648.

68 ee

is held to be incapable of contributory negligence. The great ma-
jority of states have established three as the age below which
they will not allow, consideration of contributory negligence.
Above that age, the general formula is kept flexible. Some states,
however, have adopted rules of thumb * * *. In these states,
children under seven are conclusively presumed to be incapable
of contributory negligence * * *. Such a rule seems pretty
mechanical and arbitrary.”

Finally, Restatement, Torts 2d, § 283 A, comment b, reads in
part:

‘ce % * Some courts have endeavored to lay down fixed rules
as to a minimum age below which the child is incapable of being
negligent * * *, The prevailing view is that in tort cases no such
arbitrary limits can be fixed. Undoubtedly there is a minimum
age, probably somewhere in the vicinity of four years, below
which negligence can never be found; but with the great varia-
tion in the capacities of children and the situations which may
arise, it cannot be fixed definitely for all cases.”

Social changes since the rule with respect to contributory neg-
ligence of young children was first adopted in Minnesota are sup-
portive of the rule. In Eckhardt v. Hanson, supra, decided in
1936, this court, in rejecting the Illinois rule as one derived from
an ancient and improvident analogy to the common law of
crimes, considered the Massachusetts rule to be more consistent
with conditions of modern-day life. The opinion states (196
Minn. 274, 264 N. W. 778, 107 A. L. R. 4):

“* %* * Under present-day circumstances a child of six is per-
mitted to assume many responsibilities. There is much oppor-
tunity for him to observe and thus become cognizant of the neces-
sity for exercising some degree of care. Compulsory school at-
tendance, the radio, the movies, and traffic conditions all tend
to have this effect.”

In the 41 years which have elapsed since the Eckhardt deci-
sion was written, the exposure of young children to the hazards

ee 69
of daily living and to the opportunities for instruction has been
inereased by such developments as preschool instruction and
kindergarten; television; the proliferation of toys, including toy
vehicles designed for the enjoyment of children under the age
of 7; and games. To our mind, it is not accurate to say that young
children are less alert to and less trained concerning many dan-
gers which they face today than they were at the time of Eck-
hardt.

Concern for the interests of children of tender years underlies,
to some extent at least, the decisions of courts which prefer the
Dllinois rule. But, under the rule as we employ it in Minnesota,
the likelihood of unfairness in the application of the Massachu-
setts rule seems remote. The trial judge, who has the oppor-
tunity of observing the situation firsthand, can direct that the
child involved, because of tender years, inexperience, or the
subtleties of the danger to be apprehended, cannot be held to be
contributorily negligent under the circumstances of the given
ease. This authority and responsibility on the part of the trial
judge has been recognized in our decisions.2 And when the case
is submitted to the jury, it is to be made clear, as it was in this
case, that the degree of care expected of a child is that com-
mensurate with the age, mental capacity, and understanding of
children of similar age acting under similar circumstances. See,
4 Hetland & Adamson, Minnesota Practice, Jury Instruction
Guides (2 ed.) JIG II 104 G-S. This is a matter which jurors
chosen from the community generally are particularly well able
to assess, The natural sympathy and concern of jurors for child-
ren of tender years will make it unlikely in the ordinary case that
a jury—advised of the impact of its determination of compara-
~"2See, Capriotti v. Beck, 264 Minn. 39, 117 N. W. 2d 563 (1962); Watts
v. Erickson, 244 Minn. 264, 69 N. W. 2d 626 (1955); Thomsen. v. Reibel,

212 Minn. 83, 2 N. W. 2d 567 (1942); Decker v. Itasca Paper Co. 111 Minn.
439, 127 N. W. 183 (1910),

70 a

tive fault*—will return a verdict precluding any recovery by the
injured child.

Finally, the implicit premise of the Illinois rule, i. e., that child-
yen are unable to exercise due care for their own safety before
reaching the age of 7, simply does not square with the way re-
sponsible people manage their affairs and those of their families
in Minnesota today. We know it to be a fact that conscientious
parents permit their children 5 and 6 years of age to play on side-
walks proximate to streets carrying vehicular traffic and to walk
to places such as schools and stores without adult supervision
and protection. If it be true that children of this age have no
capacity whatever to appreciate and avoid the risks of vehicular
traffic, concerned parents, best able to judge the capacity of their
children, would not permit what we know to be the common prac-
tice. In this situation, the Massachusetts rule appears more con-
sistent with the way ordinary, reasonable people conduct them-
selves than does the Illinois rule, which says in effect that no
child under the age of 7 is able to know or appreciate danger.

A rule which arbitrarily eliminates contributory negligence
as a defense either in whole or in part where the plaintiff is a
child under the age of 7 makes possible gross unfairness with
respect to a defendant charged with fault for an accident result-
ing in injury to a child of tender years. For example, if on the
date of the accident the child has lived 6 years and 364 days, the
defendant is held responsible for all of the damage, no matter
how minimal his negligence. But if the child has reached his
seventh birthday, the negligence of the plaintiff and the defend-
ant are compared and the defendant, depending upon how serious

3 Rule 49.01(2), Rules of Civil Procedure, provides as follows: “In ac-
tions involving Minn. Stat. 1971, Sec. 604.01 [comparative negligence
law], the court shall inform: the jury of the effect of its answers to the
percentage of negligence question and shall permit counsel to comment
thereon, unless the court is of the opinion that doubtful or unresolved
questions of law, or complex issues of law or fact are involved, which
may render such instruction or comment erroneous, misleading or con-
fusing to the jury.”

a ven

his lapse was from the standard of reasonable care, is relieved
in whole or in part from responsibility. The outcome of litigation
should not be permitted to depend on such a fortuitous circum-
stance as age alone.

I The claim of error founded upon the giving of the emer-
gency rule is based on the opinion of this court in Kachman v.
Blosberg, 251 Minn. 224, 87 N. W. 2d 687 (1958). The difference
between that case and this one lies in the fact that there the de-
fendant became aware of the “emergency” resulting from the
child’s presence in the street when he was 300 feet distant from
the point of impact. In this case, according to the evidence con-
strued in the light most favorable to the defendants, Mrs. Ihnot
was not aware that Paul had darted into the street until she
reached the intersection, at which time she immediately applied
her brakes, proceeding almost directly forward until she came
to a stop within a few feet of contact. We believe that if the jury
accepted this version of the facts, there was an emergency
created by the impulsive act of the child, and the instruction was
justified.

I The trial court declined to give the following requested
instruction (4 Hetland & Adamson, Minnesota Practice, Jury
Instruction Guides [2 ed.] JIG II 108 G-S.):

“Where a person (knows) (has reason to know) that children
are likely to be in the vicinity, the greater hazard created by their
presence (or probable presence) is a circumstance to be con-

sidered in determining whether reasonable care was used.
ke

There was no evidence in this case that the defendant knew
or should have known that children were any more likely to be
in the vicinity of this intersection than they were likely to be in
the vicinity of any other of like character. White Bear Avenue
is a “through-stop” highway. There are no. schools or play-
grounds located near it. There was no testimony indicating that
the presence of children was to have been anticipated. The ab-

72 Es

sence of a crosswalk leading from the east side of White Bear
Avenue to its west side at the intersection has negative implica-
tions. There are no streets or other places attractive to children
in the immediate vicinity of the accident. The Montgomery Ward
facility situated to the southwest of the intersection is not open
to the public and the parking area. near it is for the convenience
of its employees or others having specific business there. The
situation, therefore, is not one calling for a special degree of
alertness in anticipation of the presence of small children. See,
Kachman v. Blosberg, supra; Van Asch v. Rutili, 286 Minn. 9,
174. N. W. 2d 101 (1970); Knox v. City of Granite Falls, 245
Minn. 11, 72'N. W. 2d 67 (1955) ; Shawley v. Husman, 247 Minn.
510, 78 N. W. 2d 60 (1956).

II We believe that the instructions given by the trial court
with respect to the matter of speed were adequate. It is agreed
that the zone in which defendant was driving was a, 45-miles-
per-hour speed zone. In addition to instructing the jury that the
driver of a motor vehicle is under a duty to keep it under reason-
able control, the trial judge made specific reference to these ap-
plicable sections of the Minnesota Highway Traffic Regulation
Act: :

“Minnesota Statute 169.14, entitled ‘Speed Restrictions’, at
subdivision 1, reads:

“Basic rule. No person shall drive a vehicle on a highway
at a speed greater than is reasonable and prudent under the condi-
tions and having regard to the actual and potential hazards then
existing. In every event speed shall be so restricted as may be
necessary to avoid colliding with any person, vehicle or other
conveyance on or entering the highway in compliance with legal
requirements and the duty of all persons to use due care.’

“Subdivision 3 of the same section reads in part: It starts off:
‘Reduced speed required. The driver of any vehicle shall, consis-
tent with the requirements, drive at an appropriate reduced
speed when approaching and crossing an intersection when spe-
cial hazards exist with respect to pedestrians.’

es 73

“You are instructed that the mere presence of an intersection,
although it bespeaks precaution, does not require an approaching
motorist possessed of the right of way to drive at an appropriate
reduced speed unless and until special hazards exist on or about
such intersection with respect to pedestrians.”

The trial court, although requested to do so, did not read
§ 169.14, subd. 2, which is as follows:

“Where no special hazard exists the following speeds shall be
lawful, but any speeds in excess of such limits shall be prima
facie evidence that the speed is not reasonable or prudent and
that it is unlawful; except that the speed limit within any mu-
nicipality shall be a maximum limit and any speed in excess
thereof shall be unlawful:

“(1) 80 miles per hour in an urban district;

“(2) 65 miles per hour in other locations during the day-
time;

“(8) 55 miles per hour in such other locations during the
nighttime.

“ Daytime’ means from a half hour before sunrise to a half
hour after sunset, except at any time when due to weather or
other conditions there is not suffiicent light to render clearly dis-
cernible persons and vehicles at a distance of 500 feet. ‘Night-
time’ means at any other hour or at any’ time when due to
weather or other conditions there is not sufficient light to render
clearly discernible persons and vehicles at a distance of 500 feet.”

This subdivision of the section has no application in view of the
fact that there was a properly posted speed limit of 45 miles per
hour at the accident site. Apart from this, the claim that the
speed of the Ihnot vehicle exceeded 45: miles per hour is at best
speculative.*

4 An expert witness called by plaintiffs expressed the opinion that the
Thnot car, after Mrs. Ihnot withdrew pressure from the gas pedal, was
moving at a speed of 43 miles per hour when the brakes were applied.
‘The opinion was based upon the “coefficient of friction.”

74 es

Hi Our conclusion is to affirm the determination of the trial
court. We do so upon the ground that the jury’s finding with re-
spect to the contributory negligence of Paul Toetschinger is sus-
tained by the evidence. It could be persuasively argued that,
under the unusual facts of this case, defendant Candyce M.
Thnot exercised reasonable care under the circumstances as a
matter of law. In her effort to avoid colliding with the young boy
running precipitately into the highway, she appears to have done
everything that could reasonably be expected of her, under the
circumstances,

Given our conclusion on the question of liability, it becomes
unnecessary for us to consider the adequacy of the amount fixed
by the jury as damages sustained by plaintiffs.

Affirmed.

YETKA, JUSTICE (dissenting).

I respectfully dissent. In my opinion four alternative bases
for reversal are present. The first is the trial court’s failure to
instruct the jury that the likely presence of children is a factor
to be considered in determining the standard of care. The second
is the use of the emergency instruction. The third is that the evi-
dence in this case is insufficient to allow a jury to find negligence
on the part of the plaintiff. The fourth is the unnecessary con-
tinuation of the archaic rule followed in our state that a 5-year-
old child can be held negligent in an auto-pedestrian accident.
A. The failure to instruct on the presence of children.

In my opinion the trial court erred in refusing to give the fol-
lowing instruction (4 Hetland & Adamson, Minnesota Practice,
Jury Instruction Guides [2 ed.] JIG II 108 G-S):

“Where a person (knows) (has reason to know) that children
are likely to be in the vicinity, the greater hazard created by
their presence (or probable presence) is a circumstance to be con-
sidered in determining whether reasonable care was used. * * *”

In this case not only were children likely to be in the vicinity
but they, in fact, were. Several of the children had already

a °

crossed the street—something that defendant should have noted.
It was a foreseeable act that a little 5-year-old child might be
tempted to follow those children who had already crossed the
street. Moreover, the evidence shows that plaintiff here, only 5
years and 8 months of age, was slower mentally, both at home
and in school, than a normal child of comparable age.

B. The use of the emergency instruction.

The trial court instructed the jury that the driver of the car
was entitled to a consideration of the “emergency doctrine”
which holds that an actor who is confronted with an emergency
is not to be held to the standard of conduct normally applied to
one who is in no such situation. The rationale of this rule is
simply that a person may be confronted with an emergency
which ig not of his own making and the standard to be applied,
although still that of the theoretical reasonable person, is that
of a reasonable person in an emergency. See, Urban v. Minne-
apolis Street Ry. Co. 256 Minn. 1, 96 N. W. 2d 698 (1959);
Zickrick v. Strathern, 211 Minn. 829, 1 N. W. 2d 184 (1941). The
standard of reflection cannot be asked when reflection cannot
be taken. See, Minder v. Peterson, 254 Minn. 82, 89, 93 N. W. 2d
699, 705 (1958). Thus, in an emergency a choice “may be mis-
taken and yet prudent.” Kane v. Worcester Consol. Street Ry.
Co. 182 Mass. 201, 202, 65 N. E. 54 (1902). The standard phras-
ing of the emergency rule is found in Restatement, Torts 2d,
§ 296:

“(1) In determining whether conduct is negligent toward
another, the fact that the actor is confronted with a sudden
emergency which requires rapid decision is a factor in determin-
ing the reasonable character of his choice of action.

“(2) The fact that the actor is not negligent after the emer-
gency has arisen does not preclude his liability for his tortious
conduct which has produced the emergency.”

1 Accord, Johnson v. Townsend, 195 Minn. 107, 110, 261 N. W. 859, 861
(1935) (“* * * In [an emergency situation] the law is that one, sudden-

76 Eee

Fundamental to the application of this rule, however, is the
finding that the emergency in which the conduct has its genesis
is not of the actor’s own making.* The comments to Restatement,
Torts 2d, § 296, make this qualification strikingly clear:

“a. The rule stated in Subsection (1) of this Section is ap-
plicable where the sudden emergency is created in any way
other than by the actor’s own tortious conduct, as where it is
created by the unexpected operation of a matural force or by the
innocent or wrongful act of a third person. The fact that the
emergency is created by the actor’s own conduct does not prevent
the rule from being applicable if his conduct is not tortious.

a a

“d. Prior tortious conduct. Where the emergency itself has
been created by the actor’s own negligence or other tortious. con-
duct, the fact that he has then behaved in a manner entirely rea-
sonable in the light of the situation with which he is confronted
does not insulate his liability for his prior conduct. Such liability
is not precluded by the fact that he has acted reasonably in the
erisis which he has himself brought about. It is not his reasonable
conduct in the emergency which makes him liable, but his prior
tortious conduct creating the emergency.” (Italics supplied in
part.)

Thus, it is proper to give the instruction on emergency instances
where a driver, traveling on a through high-speed highway, was
suddenly confronted with a vehicle unlawfully crossing the high-
way from the driver’s left (Zickrick v. Strathern, 211 Minn. 329,
1 N. W. 2d 134 [1941]) ; where a truck driver suddenly finds his
brakes malfunctioning through no fault-of his own (Trudeau v.

ly confronted by a peril, through no fault of his own, who in the at-
tempt to escape does not choose the best or safest way, should not be
held negligent because of such choice unless it was so hazardous that
the ordinarily prudent person would not have made it under similar
conditions.”)

2 See, e. g., Mathews v. Mills, 288 Minn. 16, 178 N. W. 2d 841 (1970);
Erickson v. Quarstad, 270 Minn. 42, 182 N. W. 2d 814 (1964).

a "

Sina Contracting Co. Inc. 241 Minn. 79, 62 N. W. 2d 492
[1954]) ; or where a driver while driving on the highway at night
suddenly comes upon an unlighted hayrack drawn by a team of
horses (Vasatka v. Matsch, 216 Minn. 530, 18 N. W. 2d 483
[1944]).

However, where the negligence of the party seeking to invoke
the instruction contributed to the emergency, the instruction
should not be given, such as where a driver is met with an “emer-
gency” because he is driving at too high a speed on an icy high-
way (Ind v. Bailey, 198 Minn. 217, 269 N. W. 638 [1936]); or
where a driver attempts to pass another car by driving on the
shoulder of the road and must take sudden action because the
shoulder is not as firm as he expected (Zobel v. Boutelle, 184
Minn. 172, 238 N. W. 49 [1931]).

The driver of the car here was presented with an “emergency”
of her own making. No claim is made that the operation of the
car once the brakes were applied was improper. The claim here
is that the operation of the vehicle prior to the accident was
negligent because of lack of vigilance in spotting the children
and in the failure to reduce speed once their presence (and, it
must be assumed, their predilections) were known. Even viewing
the facts most favorably to the driver, we must accept that the
jury found her negligent. The sole source of that negligence could
only have been improper lookout and speed. Thus, the “emer-
gency” was not, as the rule requires, the result of the actions of
a third party.

A second limitation on the emergency doctrine is simply that
there are some “emergencies” which must be anticipated. The
ordinary, customary and expected movements of traffic upon
public highways cannot be regarded as so perilous as to require
that the emergency rule be applied in judging the reasonable-
ness of the actions of drivers meeting such traffic, Alex v.
Jozelich, 248 Minn. 27, 34, (78 N. W. 2d 440, 445 (1956). See,
e. g., Seitzer v. Halverson, 231 Minn. 230, 42 N. W. 2d 685 (1950)

18 ee

(child-pedestrian using crosswalk). Most importantly, drivers
must anticipate the actions of children standing on the curb.
Prosser states this general qualification in the following
language:

“A further qualification which must be made is that some
‘emergencies’ must be anticipated, and the actor must be pre-
pared to meet them when he engages in an activity in which they
are likely to arise. Thus under present day traffic conditions,
any driver of an automobile must be prepared for the sudden
appearance of obstacles in the highway, or of other vehicles at
intersections, just as one who sees a child on the curb may be re-
quired to anticipate its sudden dash into the street, and his
failure to act properly when they appear may be found to amount
to negligence.” (Italics supplied.) Prosser, Torts (4 ed.), § 33,
p. 170.

‘The case of Kachman v. Blosberg, 251 Minn, 224, 87 N. W. 2d
687 (1958), is one of the cases cited by Prosser for this principle.
In Kachman, this court was presented with a set of facts virtual-
ly identical to those before us now and stated (251 Minn. 232,
87 N. W. 2d 694):

«* * * This court has expressed the view (Carlson v. Sani-
tary Farm Dairies, Inc. supra) that, where children are known
or may reasonably be expected to be in the vicinity, a degree of
vigilance commensurate with the greater hazard created by their
presence or probable presence is required of a driver to measure
up to the standard of what the law regards as ordinary care. It
is but a restatement of the rule that ordinary care is the exercise
of a, degree of care commensurate with the circumstances.

“That an automobile driver can run down a child in plain sight
of him without liability is not the law in this state. Mr. Justice
Stone speaking for the court in Weasler v. Murphy Transfer &
Storage Co. 167 Minn. 211, 218, 208 N. W. 657, 658, said:

‘If there is one cause which, more than any other, should lead
to the exercise of a high degree of care by an automobile driver,

a °

it is the presence of children in such a situation that any com-
bination of action on their part and his can result in injury ‘to
them.’

“One of the elements of the issue of defendant’s negligence
in this unfortunate accident is whether or not defendant was
guilty of negligence in approaching so near to Terresa before
applying his brakes that it was impossible for him to control
his car and avoid a collision. He had seen the children ahead of
him, on the edge of the highway, for a distance of at least 300
feet. He must have observed that they were children. It was a fact
question whether or not under the circumstances defendant was
guilty of negligence in failing to keep a proper lookout and to
have his car under sufficient control to avoid a collision which
he could foresee the movement of the children might precipitate.
The presence of Terresa upon the highway called for greater cau-
tion from defendant than if she had been an adult. Any careful
driver will always regard the presence of a child in the street as
a warning. The impulsiveness of childhood and youth is known
to everyone; that they may be moved by sudden change of mind
or act pursuant to a peculiar design wholly unexpected by others
should be familiar to every driver of an automobile. As was said
in Olesen v. Noren, 161 Minn. 113, 115, 201 N. W. 296:

«“«x * * They are innocent, sometimes bent on innocent mis-

chief, free from care, and at times unconscious of impending
dangers. These peculiarities of childhood are common and if un-
appreciated by automobile drivers, who use our streets, they
will be duly appreciated by the persons who sit in the jury box.’ ”
(Italics supplied.)
Thus an impulsive act on the part of a child standing beside a
road is not so exceptional that a reasonable driver would not pre-
pare for it. This is not a case for the application of the emer-
gency rule for the reason stated in Kachman (251 Minn. 235, 87
N. W. 2d 695) :

80 Eee

“* * * We have said that the sudden-emergency rule is in-
applicable unless it be first determined that there existed a real
peril, to which the party seeking its protection did not contri-
bute by his own want of care, and that the rule cannot be success-
fully invoked by a party who has brought the emergency upon
himself or who has failed in the application of due care to avoid
it. Therefore any act, or failure to act, amounting to a lack of
due care defeats the right to claim the benefit of the emergency
tule, * * *

“Tt seems obvious to us that the defendant brought on the
emergency by driving at the speed he did after he had observed
the children on the edge of the highway and by failing to keep
a proper lookout and make a timely application of his brakes in
order to sooner bring his car under control. As the evidence
stands defendant did choose the best and safest way in his at-
tempt to avoid colliding with Terresa upon the highway and
would undoubtedly have succeeded except for the speed he was
traveling when he first made an application of his brakes. He
took his foot off the accelerator when he saw the children on the
edge of the highway 300 feet up ahead. In doing so he must have
anticipated some movement by the children. He did not apply
his brakes to slow up his speed of 45 to 47 miles per hour until
some 60 feet from Terresa. Had he been going more slowly he
would have avoided the accident. He operated a skidding car for
a distance of 62 feet because of his speed. Bakken v. Lewis, 223
Minn. 329, 26 Ni. W. (2d) 478; Hutzler v. McDonnell, 239 Wis.
568, 2 N. W. (2d) 207; 18 Dunnell, Dig. (3 ed.) § 6972a.

“Upon the evidence we see no basis for an application of the
sudden-emergency doctrine. We think it obvious that, if defend-
ant had kept a proper lookout and made timely application of
his brakes in reduction of his speed, he would not have found
himself overtaken by the emergency of which he now complains.”
C. The evidence was insufficient as a matter of law to indicate

that the plaintiff in this case understood the nature of
hazard.

a .

The “reasonable person” standard, per se, does not apply to
children. They are not held, as are adults, to meet the theoretical
community standard in spite of any personal inadequacies. An
adult who falls short of the standard of the reasonable person,
for whatever reason, acts at his peril.

The same standard of strictness, however, does not apply to
children. The care demanded of an infant is only ‘that of a child
of like age, experience, and intelligence. Thus, even if the the so-
called Massachusetts rule is to be applied, there must be a suf-
ficient showing of the capacities of the child in question. The
standard is not that of the ordinary child of 5 years and 8 months,
but rather that of Paul Toetschinger.

One applicable test is set forth in Watts v. Erickson, 244 Minn.
264, 268, 69 N. W. 2d 626, 629 (1955):

“While it is apparent from the record that the trial court at-
tempted to follow substantially the [Massachusetts rule], it is
our opinion that, before the issue of contributory negligence of
plaintiff was submitted, the jury should have had some informa-
tion with reference to the experience, intelligence, maturity,
training, and capacity of plaintiff. The child did not appear as
a witness, and, as far as we can learn from the record, about: the
only information the jury had with reference to those matters
was whatever observations it may have taken of plaintiff when
he was around the courtroom. In other words, there was no show-
ing of the qualifications of this particular child, such as experi-
ence in crossing streets, the amount of traffic instructions he
had received in his home, and his general intelligence, knowledge,
or experience, except the reference made by his mother. For ex-
ample, one child of the same age as another may distinguish,
understand, or recognize a danger which the other would not.
Environment, locale, and home and school training all may enter
into the picture. A child reared in a large city may be alert to,
and be perfectly capable of recognizing or avoiding, the dangers
of heavy traffic on crowded streets but oblivious to the dangers

82 ee

of complicated farm machinery while visiting his country cousin.
On the other hand, a child of the same age and average intelli-
gence reared on: a farm may be very keen as to the dangers of
a power mower, a tractor, or other farm machinery but not
instinctively conscious of traffic and other dangers found in a
large urban. center.

“Tt is our opinion under the record here that a new trial should
be granted so that the jury may be more completely informed
as to the experience, training, and intelligence of plaintiff before
it attempts to pass on the question of his contributory negli-
gence. This is particularly true of children under kindergarten
or school age who have not yet had the opportunity to receive
school safety instructions and training.”

Based on this standard, I would hold as a matter of law that
Paul Toetschinger was unable to appreciate the dangers with
which, it is now charged, he wantonly confronted. See, e. g.,
Thomsen v. Reibel, 212 Minn. 88, 2 N. W. 2d 567 (1942) ; Decker
v. Itasca Paper Co. 111 Minn. 439, 127 N. W. 183 (1910). He
could neither read nor write. He lived in an area which consisted
mostly of open fields. And, most importantly, the record indi-
cates his mental development was less than other children his
age. The mind of a child of 5 years and 8 months is delicate
enough, but here the record indicates we are dealing with a
standard less than that, perhaps less than 5 years. I cannot hold
that this child could be guilty of contributory negligence. The
law cannot impose a duty which cannot be met.

D. The unnecessary continuance of the rule which allows a find-
ing of negligence on the part of a 5-year-old child.

In refusing to adopt the rule that children under the age of
7 cannot be held contributorily negligent, the majority opinion
rests its decision squarely on the doctrine of stare decisis. As
weighty as that doctrine may be, however, I feel that its full ap-
plication here is inappropriate.

An overruling of our’previous decisions which adopt the Mas-
sachusetts rule cannot be undertaken lightly. The doctrine of

a °

stare decisis is, indeed, one of the most important in the law. In
its simplicity it expresses reverence for civil authority and the
expression of the people’s expectation that government be ad-
ministered with great.care and with a reasonable degree of con-
sistency, and their confidence that it be so. And it involves the
injunction that official functionaries shall not for light reasons
abandon the expressed judgments of themselves or of their
predecessors, especially if any serious embarrassment of social
order may be the consequence. For this simple reason, their judg-
ments are entitled respect and reverence.

Stare decisis, however, is not an inflexible rule of law but
rather a policy of the law. See, Johnson v. Chicago, B. & Q. Rail-
road Co, 248 Minn 58, 68, 66 N. W. 2d 763, 770 (1954). And
there are certain well-recognized limitations to the policy. The
strictness with which the policy is followed is measured by the
nature of the case. Ibid. In instances where the earlier opinion
announced a rule fixing the status of property or affecting the
title to real estate, the court should continue to adhere to the
previous rule even though it thinks that the rule is antiquated
in practice because of changed conditions. In such an instance,
the decision whether to make the needed reform is properly with-
in the sole domain of the legislature. This is because the fabric
of our economic system is interwoven so closely with the owner-
ship of property that stability in this regard is of the utmost im-
portance. Similarly, when the rules announced in the previous
decisions have entered the general life of the people, and con-
tracts are made on the faith of the rules, or if they have given
rise to standards of trade or customs, the policy of stare decisis
should apply with all its vigor.

When, however, the prior decisions do not relate to titles,
establish rules of trade, property, or contract, or fall into similar

8 See, e. g., Messerschmidt v. Baker, 22 Minn. 81, 84 (1875). See, also,

In re Trust Created by Moulton, 233 Minn, 286, 303, 46 N. W. 2d 667, 676
(1951).

84

categories and after full deliberation a court decides that
through lapse of time and change of conditions those rulings so
relied upon become inapplicable, it should not hesitate to make
its decisions coextensive with the mores of the day. To do other-
wise would be to invite governance by the dead hand of the past.
In the phrasing of Justice Cardozo:*

“* * * But I am ready to concede that the rule of adherence
to precedent, though it ought not to be abandoned, ought to be
in some degree relaxed. I think that when a rule, after it has been
duly tested by experience, has been found to be inconsistent with
the sense of justice or with the social welfare, there should be
less hesitation in frank avowal and full abandonment, We have
had te do this sometimes in the field of constitutional law. Per-
haps we should do so oftener in fields of private law where con-
siderations of social utility are not so aggressive and insistent.
There should be greater readiness to abandon an untenable posi-
tion when the rule to be discarded may not reasonably be sup-
posed to have determined the conduct of the litigants, and par-
ticularly when in its origin it was the product of institutions
or conditions which have gained a new significance or develop-
ment with the progress of the years. In such circumstances, the
words of Wheeler, J., in Dwy v. Connecticut Co., 89 Conn. 74,
99, express the tone and temper in which problems should be
met: “That court best serves the law which recognizes that the
rules of law which grew up in a remote generation may, in the
fullness of experience, be found to serve another generation bad-
ly, and which discards the old rule when it finds that another rule
of law represents what should be according to the established
and settled judgment of society, and no considerable property
rights have become vested in reliance upon the old rule. It is thus
great writers upon the common law have discovered the source
and method of its growth, and in its growth found its health and
life. It is not and it should not be stationary. Change of this char-

4 Cardozo, The Nature of the Judicial Process, p. 150.

a “

acter should not be left to the legislature.’ If judges have woefully
misinterpreted the mores of their day, or if the mores of their
day are no longer those of ours, they ought not to tie, in helpless
submission, the hands of their successors.”

In the case before us we are favored with a request for the ap-
plication of a humane rule to the actions of children. The ma-
jority opinion rejects this rule on the basis that this court in past
years and past circumstances has decided the question adverse
to the appellants position. I cannot agree. It is time for a change.

The rule which we consider is not one of property nor one of
contract, nor one of trade custom, but rather one of personal
rights. There can be slight concern here that a deliberate change
of course may undo any solemn transactions. Neither property
rights nor contracts nor customs of trade will be any less sound
if the change is made. Most importantly, it cannot be said that
this rule has entered the common affairs of the people to the ex-
tent that action is taken in reliance on the rule. The driver of a
ear does not turn his wheel or apply his brakes in reliance on any
rule that, should his actions become errant, liability may or may
not be imposed upon him because of the age of the pedestrian
he might strike. We are concerned here instead with the just divi-
sion of those losses in a manner most consistent with public
policy. Thus, a considered and deliberate change in policy here,
while it cannot be undertaken lightly or considered without the
full import of its ends, is not beyond the ambit of our abilities.

Tam of the opinion that changes of social condition and policy
which have taken place since the adoption of the Massachusetts
rule in our state are such that the continued and systematic ap-
plication of that policy no longer serves the general welfare.

The adoption of the rule in this state was not a choice easily
made. Obvious anguish attended the decision. The first oppor-
tunity this court had to discuss specifically whether a child under
the age of 7 years could be held guilty of contributory negligence
was in dictum in Decker v. Itasca Paper Co. 111 Minn. 489, 127

86 es

N. W. 183 (1910), a case in which we held that as a matter of
Jaw a 5-year-old child who was killed while playing near a stor-
age elevator could not have appreciated the danger. In that case
the court stated (111 Minn. 444, 127 N. W. 184):

“Decedent was a little past five years old, a bright boy, and
shown to have possessed the intelligence usually found in chil-
dren of that age. The question whether a child under the age of
seven years, and therefore, under express law, incapable of com-
mitting a crime, may be held guilty of contributory negligence,
has been presented to the courts of the several states with vary-
ing results. The conclusions reached are conflicting. In. some
jurisdictions the question is tested by the mental capacity of the
child and the character of the danger confronting him, while in
others the rule of the criminal law is applied. In the latter juris-
dictions it is maintained that if a child is, by reason of his age,
deemed incapable of crime, for the same reason he should be held
incapable of forming opinions or appreciating risks and dangers
with which he may come in contact.

“The question is not free from doubt. There is force and merit
to both sides of the question. A child of six or seven years of age
might be shown to have possessed the necessary intelligence to
comprehend, or to have received warnings and instructions con-
cerning a particular danger, and be chargeable with contributory
negligence when injured from such danger. On the other hand,
a child of the same age, but of less intelligence, and without
warnings, might well be held, as a matter of law, free from fault
and incapable of apprehending the dangers before him. And
again, if incapable of forming the intent essential to the commis-
sion of a crime, it is a little difficult to perceive the reason for
charging him with intelligence enough to comprehend the
dangers of personal injury.”

The question was not squarely decided for the first time
until 1936 when this court adopted the so-called Massachusetts
rule in Eckhardt v. Hanson, 196 Minn. 270, 264 N. W. 776, 107

a "

A. L, R. 1 (1986). The text of the Eckhardt case sets forth the
general arguments in favor of each rule (196 Minn. 272, 264
N. W. 777, 107 A. L. R. 2):

“This appeal squarely raises the question of whether a child
under seven years of age can ever be guilty of contributory negli-
gence. Under the so-called Illinois rule (which is analogous to
the common law rule with respect to the nonresponsibility of
such young children for criminal acts), it is held that a child
under seven is incapable of contributory negligence. [Citations
omitted.] This rule has the merit of being easy to apply. How-
ever, it is arbitrary and always open to the objection that one
day’s difference in age should not be the dividing line as to
whether a child is capable of negligence or not. Courts following
the Massachusetts rule hold that the question of contributory
negligence of a child under seven years of age is for the jury
under proper instructions. * * *

“In Minnesota neither rule has been definitely adopted.”

On the basis of precedent, and its supposed affixation to our
law, the Massachusetts rule was followed in the decisions of our
court to date.® Based on these decisions, the majority would re-
fuse to apply the rule offered. I cannot agree.

In its stead I would propose the adoption of the rule that (1)
children under the age of 7 years are conclusively presumed to
be incapable of contributory negligence, and (2) that a child
from 7 to 14 years of age is presumed to be incapable of con-
tributory negligence until such presumption is rebutted. I would
only apply the ordinary rules of negligence to children beyond
the age of 14.

5 See, e. g., Carlson v. Sanitary Farm Dairies, Inc. 200 Minn. 177, 273
N. W. 665 (1937); Forseth v, Duluth-Superior Transit Co. 202 Minn. 447,
278 N. W. 904 (1988); Audette v. Lindahl, 231 Minn. 239, 42 N. W. 2d 717
(1950); Bruno v, Belmonte, 252 Minn. 497, 90 N. W. 2d 899 (1958); Pelzer
v. Lange, 254 Minn. 46, 93 N. W. 2d 666 (1958).

88

The justifications for such a decision, in my mind, are sever-
al. First, the adoption of this rule would add a humane measure
of certainty to the treatment of personal injury actions involving
children. Commentary and court decisions® critical of the rule
I would adopt stress that the use of a conclusive presumption
would leave the public open to the wanton acts of children with-
out opportunity for recourse. The simple fact of the matter, how-
ever, is that such a classification is just one of many which have
children as their subject and look to the public conscience as their
final arbiter. A child, upon turning 18, for example, may vote.
Some persons of this age may not be ready to fully appreciate
that right while others might make cogent use of it at an earlier
age, but are not allowed the opportunity. Yet no serious claim
is ever made that the granting of the right to vote must be made
on an individual basis. One reason, among others, is simply that
the collective experience of our governance system at that time
in our existence felt that setting the limit at 18 provided the
balance at which the competing interests met in equipoise. At
a previous time the point had been 21 years, or 19 years. The
same can be said for the setting of the legal age of reason for the
ability to choose a guardian at 14, or the capacity to commit a
crime at 14. See, Minn. St. 609.055. The last example is, I feel,
particularly pertinent. The exact argument which is raised
against the setting of the age at which a child can be held negli-
gent at 7, can be made against the setting of the age at which a
child can commit a crime at 14. The argument is not made that
by so doing we will be opening the treasures of society, un-
guarded, to the reach of every small grasping hand. Again, the
reason is that, in balance, when the competing forces are placed
one against the other the public conscience has placed the balance
at 14,

In the type of case now before us we are asked to devolve the
rules which shall govern the conduct of young children. A point

6 See, Eckhardt v. Hanson, 196 Minn. 270, 264 N. W. 776, 107 A. L. R.
1 (1936). See, also, Prosser, Torts (4 ed.), § 32, p. 154.

a °

must be set. In the tender years of childhood there is a zone
where it can be said that reasonable minds of that day cannot
differ, and that, as a matter of law, children must be held in-
capable of contributory negligence. The Massachusetts rule,
which I would jettison, puts the point of reason afloat on an un-
easy sea of circumstance, often difficult to appreciate and sus-
ceptible of far-ranging results.

Instead, I would have it set at 7, on a policy decision that the
collective experience of our community mandates, in my eyes,
that children below the age of 7 do not command either the ex-
perience or the growth of mind to appreciate the dangers of 2-
ton steel vehicles and their death-pronouncing force. It may be
a simple matter for a person seemingly possessed of the deep eyes
of wisdom to fathom the rigors which throw themselves before
a child of tender years. Yet we must, by necessity, dissolve the
years which divide us all from children 5 years and 8 months old.
Remove the ability to read and all the information which it ren-
ders; remove the discipline of mind and body which flow from
schooling; and remove a great appreciation of danger. I believe
that a child who, in all likelihood, can’t spell “car” or read
“STOP” is entitled to greater protection than the Massachusetts
rule, as pristine as it may appear in theory, can ever supply in
practice. In this regard, one commentator on the subject has
stated in 1935. (Wilderman, Presumptions Existing in Favor of
the Infant in Re: The Question of an Infant’s Ability to be
Guilty of Contributory Negligence, 10 Ind. L. J. 427, 485):

“The majority of the states set an arbitrary age limit below
which no infant can be held guilty of contributory negligence.
The minority sends every case to the jury except where the facts
are undisputed and can result in but one conclusion. Age is the
only fact considered by the majority. The minority treat age as.
just one of the many facts to be considered by the jury in set=
tling that particular case before the court.

90 : es

“Which view is preferable? Under which view is the infant
accorded the greater amount of protection?

“The writer accepts the majority view for the following rea-
sons: The majority view is administratively expedient. The pos-
sible danger of a shifting standard is avoided. The confusion and
inconsistency which oftimes mark jury decisions is eliminated.
The law is crystallized and defined. The application of the ma-
jority view is simple.

“The majority view in setting an arbitrary age attaches full
significance to the fact that infants as a class lack that judgment
and discretion which comes with age and experience. While the
infant may have knowledge of the possibility of injury when he
runs in front of a moving trolley, the writer contends that he
fails to consider the full consequences, the immediacy of the dan-
ger and the severity of the consequences. The infant acts on im-
pulse. Seldom, if ever, does the infant stop to consider the full
consequences of any act. The possibility that he may be crippled
for life or even killed is not appreciated. All that concerns the
infant is his present desire. Deliberation and a sensible choice
of alternatives in the light of future consequences are not the
attributes of one of tender years.

“The minority view fails to give adequate protection against
this youthful deficiency in judgment and discretion. The tend-
ency of the jury in considering the case before it is to attach
importance to the fact whether or not the infant had knowledge
of the possibility of present danger. The juror is impressed with
the immediate facts and the infant’s conduct in relation thereto
and may not, unless clearly instructed by the court, go beyond
those facts which are brought to his attention. The juror fails
to consider whether or not the infant plaintiff would have done
what he did in this case had he the ability to temper his im-
pulsive action with the judgment and discretion which comes
with age and experience. The public charge of tomorrow de-
mands present protection.

“The negligent defendant placed the injurious force in opera-

a *

tion, The infant was injured as a result of the defendant’s acts.
The courts are cognizant of the fact that the infant is not fully
able to take care of himself and as a result has set a different
standard of care for the infant than it has for the adult. If we
agree that infants as a class are to be treated with leniency, why
should we strive to relieve a negligent defendant whose only
claim to be absolved from liability is based on the alleged fault
of that group whom we seek to protect? This argument is prac-
tically sound. The complications of modern civilization with its -
crowding traffic and premium on speed has lessened the odds
in favor of safety for infants. Why decrease these odds any
further by favoring that negligent adult who initiated the in-
jurious force with knowledge of its capacity to do harm?”

While the adoption of a conclusive presumption may offer pro-
tection to more than is needed, any potential for mischief which
may result seems slight in comparison. Critics of this rule, as
their main argument, contend that somehow society will be sub-
jected to a rash of unchallenged, wanton behavior by children.
T do not see, however, the source of that threat. The rule I would
adopt only speaks of the acts of the children themselves. It would
not release parents or other persons who through their own in-
advertence place a child in a position of peril it may not appre-

. ciate. Nor would it encompass intentional acts of purposeful
destruction on the part of the child, for which the child or the
parent may be answerable. Any danger resulting from overin-
clusion is, I feel, largely illusory.

Moreover, the age of 7 is not so arbitrary as critics of such a
rule would believe. That the common law’ and the civil law, as.

7 See, 4 Blackstone, Commentaries, 22-24.

81 Austin, Jurisprudence (5 ed.) p. 492, in discussing the case of in-
fants under 7 states: “Here, according to the Roman Law, and (semble)
according to our own, the infant is presumed juris et de jure incapable
of unlawful intention or culpable inadvertence. His incapacity is in~
ferred or presumed from the age wherein he is; and proof to the con-.

92 —

well as jurisprudence generally,® treat children below the age
of 7 and from 7 to 14 with varying standards reinforces rather
than weakens this argument. It represents a formidable reservoir
of experience. While the balance in earlier years may at times
have been crudely balanced, the collective judgment which they
represent should not be so lightly disregarded, as imperfectly
expressed as it may have been.

Indeed, modern psychology tends to reinforce the age of 7 as
one of divisional importance. As noted by Justice McAllister in
an exceptionally well-considered opinion endorsing the adoption
of the rule I propose (Tyler v. Weed, 285 Mich. 460, 473, 280
N. W. 827, 882 [1938] [dissenting in part]):

“What is there in actual fact, science, or research to justify
a different treatment of children under the age of seven years
from those that have passed this age? One cannot fail to be im-
pressed with the fact that these conclusions which crystalized
centuries ago regarding the special status of a child of this age,
have been confirmed by present day observers and scientists in
the specialized field of child care, education and psychology. In
recent times, the studies of Alfred Binet, in France, Hans Gross,
in Austria, Jean Piaget, in Switzerland, and Maria Montessori,
in Italy, have brought a new light upon the mysterious mind of
the child, and have elucidated many of the obscure areas in the
understanding of mental development and growth in infancy and
adolescence.

“What is remarkable in the conclusions arrived at by such re~
search, is the fact that the age of seven years marks a transi-
tional line in the mental development of children. In the copious
and rich literature devoted to the subject, there repeatedly recurs
the emphasis upon this age as marking the inception of thought

trary of that pre-appointed inference is not admissible by the tri-
bunals.”

94 Pound, Jurisprudence, pp. 311 to 331 (treatment of minority as a
disability in the law in ancient as well as present common law and civil
Jaw countries).

a °

and reason, the commencement of exchange of ideas, the begin-
ning of concepts of justice. Authorities hold that this age marks
the passage from the period of self-centered speech and thought
to verbal understanding and social thought and cooperation. In
short, the age of seven years can be said to be the threshold over
which a human being passes from the realm of imagination and
dream to the world of reality and fact.

“Dr. Hans Gross, late professor of law of the Universities of
Prague and Vienna, former judge of the law courts of Austria,
and pre-eminent examining magistrate of Europe, referred to
by Dean Wigmore as the scholar who has done more than any
other man in modern times to encourage the application of
science to judicial proof, says:

“Because the child is in the process of growth and develop-
ment of its organs, because the relations of these to each other
are different and their functions are different, it is actually a
different kind of being from the adult. When we think how dif-
ferent the body and actions of the child are, how different its
nourishment, how differently foreign influences affect it, and
how different its physical qualities are, we must see that his men-
tal character is also completely different.’ Criminal Psychology,
A Manual for Judges, Practitioners and Students, Hans Gross,
p. 364, The Modern Crime Science Series, Boston, 1918.

“ We cannot place ourselves at the point of view of the child;
it uses indeed the same words as we do, but these words convey
to it very different ideas. Further, the child perceives things dif-
ferently from grown-up people. The conceptions of magnitude,
great or small, of pace—fast or slow, of beauty and ugliness, of
distance—near or far, are quite different in the child’s brain,
from in ours; still more so when facts are in. question. * * *
The horizon of the child being much narrower than ours, a large
number of our perceptions are outside the frame within which
alone the child can perceive. We know, within certain limits, the
extent of this frame. * * * But in many directions we do not

94 Le

know the exact point where its faculty of observation commences
or stops. At times we cannot explain how it does not understand
something or other, while at other times we are astonished to
see it find its bearings easily among matters thought to be well
beyond its intelligence.’ Criminal Investigation, A Practical
Textbook for Magistrates, Police Officers and Lawyers, p. 62,
Hans Gross, London, 1924.

“To judge a child according to the standard and from the view-
point of an adult is unjust, for the difference between the adult
and the child is not to be sought in the immaturity and ex-
perience of the child; nor does the child differ from the adult by
reason of its small knowledge and narrow outlook; he is a being
with needs of his own and a mentality adapted to his needs.”

If there is any reason for arbitrary age qualifications or dis-
abilities in law, they would certainly be as capable of justifica-
tion when used in the protection of little children from wrongs.

In the area of auto-pedestrian accidents the legislature has
already performed our task for us. The enactment of the Min-
nesota No-Fault Automobile Insurance Act eliminates, for the
most part, the issue of fault on the part of a pedestrian who is
hit by a motor vehicle covered by the act. See, Minn. St. 65B.46.
That determination should hasten rather than impede our deci-
sion here.

In sum, I am of the opinion that the mores of our day, the col-
lective experience of our culture, the sciences and the basic ends
of public welfare mandate that we adopt a conclusive presump-
tion that children under the age of 7 cannot be contributorily
negligent. I feel that the abolishment of that rule is long overdue.
It might have had some relevance in the nineteenth century when
children’s main exposure to traffic danger was the horse and
buggy, and when our knowledge of human behavior and psychi-
atry and the mental testing of individuals was in its infancy, but
it has no relevancy today at all.

I do not urge the reversal of our previous decisions lightly.
However, with all due respect given to the doctrine of stare

EE 95

decisis, it cannot ask that we make the same mistake twice. The
law is a living thing. It must be stable, but it cannot stand still.

Scort, Justice (dissenting in part).

I agree with the dissent of Mr. Justice Yetka to the extent that
we adopt a conclusive presumption that children under the age
of 7 cannot be contributorily negligent, on the basis that the law
should not impose a duty that cannot be met.

KELLY, JUSTICE (dissenting in part).

I join in the dissents of Mr. Justice Yetka and Mr. Justice
Scott as to the proposed adoption of a conclusive presumption
that children under 7 years of age cannot be contributorily neg-
ligent.

Topp, JUSTICE (dissenting in part.)

I join in the dissent of Mr. Justice Yetka on both the issues
of error in giving the emergency instruction and adopt his views
as to the conclusive presumption of non-negligence for children

under 7 years of age.

AAMCO INDUSTRIES, INC., AND ANOTHER v.
WILLIAM E. DeWOLF.

250 N. W. 2d 835.

January 27, 1977 — No. 46394.

2
a

Le]
Andrew P. Engebretson, for appellant.
Maslon, Kaplan, Edelman, Borman, Brand & McNulty, John
C. McNulty, Marcy S. Wallace, George J. Hayward, and R.
Michael Kennedy, Jr., for respondents.

Heard before Kelly, Todd, and MacLaughlin, JJ., and con-
sidered and decided by the court en banc.

Topp, JUSTICE.

William E. DeWolf operated an AAMCO transmission service
facility franchise in Bloomington, Minnesota. The Consumer Di-
vision of the Minnesota Attorney General’s office received
numerous complaints about the operation of DeWolf’s facility.
The attorney general’s office contacted the AAMCO national con-
sumer affairs office. Through a cooperative investigation be-
tween AAMCO and the attorney general’s office, evidence of
serious consumer fraud was obtained. AAMCO terminated
DeWolf’s franchise immediately and. brought action ‘for declara-
tory and injunctive relief. The trial court granted the relief
sought by AAMCO. We affirm.

AAMCO Transmissions, Inc., is a wholly owned subsidiary
of AAMCO Industries, Inc., and is authorized to do business in
Minnesota. Hereinafter, these parties will be referred to as
“AAMCO.” AAMCO is the owner of those registered United
States trademarks incorporating the name “AAMCO.” It
operates a nationwide chain of franchises to provide automobile
automatic transmission service. AAMCO has operated in Minne-

EE 97

sota for many years. In 1967, as a result of numerous consumer
complaints, AAMCO entered into a stipulation of settlement with
the State of Minnesota which provided in part as to AAMCO and
their franchisees as follows:

“a) They shall not sell their remove, disassemble inspect and
reassemble service when such service is not reasonably required,
and such service shall not be sold until the customer’s automobile,
if operable, has been road tested.

“b) They shall not without express authorization remove and
disassemble the transmission from a prospective customer’s auto-
mobile; nor shall they remove and disassemble the transmission
from a prospective customer’s automobile for the purpose of
knowingly and falsely misrepresenting that they had discovered
a serious transmission problem requiring extensive major re-
pair.

“c) They shall not falsely represent that a customer’s origi-
nal transmission parts are worn, defective, and the cause of a
serious transmission problem, the nature of which makes it ad-
visable that the customer purchase a rebuilt transmission or
major repair.”

As a result of the adverse publicity generated by these proceed-
ings, AAMCO’s operations in Minnesota were reduced to a single
company-supported facility.

On December 17, 1970, a Federal Trade Commission consent
order was entered which states that AAMCO and their fran-
chisees are to cease and desist from the following practices with
respect to customers of their facilities:

“a) Misrepresenting, in any manner, the nature or extent
of any service or parts necessary to properly repair an automo-
tive component.

“b) Misrepresenting to a customer that his transmission
problem is an internal one necessitating the removal of the trans-
mission from the automobile and its disassembly for diagnosis.

“c) Removing and disassembling the customer’s transmis-

98 es

sion for the purpose of misrepresenting that a serious transmis-
sion problem has been discovered requiring major repair service.

“d) Failing to provide all customers, at the time of billing,
with an itemized list of all parts and labor for which the. cus-
tomer is being charged in connection with the sale, service or re-
pair of an, automobile transmission or any other automotive
component; and if any such parts were used or reconditioned,
a clear disclosure on such list of the fact that such parts were
used or reconditioned as the case may be.

“e) Using any deceptive sales scheme or device to induce the
sale of the products or services offered by respondents or their
licensees or franchisees.”

As part of their rehabilitation program, AAMCO established
a manual of procedures to be followed by each of its facilities to
insure compliance with the requirements placed on its business
operation by the Federal government and various state govern-
ments, including Minnesota. In 1973, AAMCO entered into the
franchise agreement with DeWolf to operate the AAMCO facility
in Bloomington. As part of the agreement, DeWolf specifically
agreed to abide by all procedures established by AAMCO and
to deal fairly and honestly with his customers so as to not detract
from nor bring into disrepute the trade name of AAMCO. From
its inception, the DeWolf center was a profitable business enter-
prise. In 1974, the center reached a pinnacle of achievement with-
in the AAMCO franchise chain when DeWolf was nominated to
the president’s club, an honorary group of franchisees selected
because of the successful nature of their particular operation.

However, during 1975, a series of substantial complaints in-
volving DeWolf’s operation were received by the consumer divi-
sion of the office of the attorney general. In response thereto,
the attorney general’s office contacted the director of the con-
sumer affairs department of AAMCO’s national headquarters
to inform him about the alleged questionable practices at the
DeWolf center. Due to the nature and number of the complaints,

P| 99

AAMCO and the attorney general’s office agreed to conduct a
joint investigation of the center without DeWolf’s knowledge.

AAMCO immediately dispatched two technical employees to
Minnesota and placed them at the disposal of the attorney gen-
eral’s office. The investigative technique that was employed is
sometimes referred to as “shopping,” which consists of sub-
mitting for service vehicles in good operating order except for
minor artificially induced malfunctions. To implement the in-
vestigation, a temporary garage was acquired and established
in Bloomington. Three automobiles were obtained by the attorney
general’s office and turned over to the AAMCO technicians who
completely rebuilt each transmission. The vehicles were road
tested to assure proper transmission function. After the initial
road test, the technicians artificially induced a minor malfunc-
tion in each automobile which could easily be corrected. Then
the automobiles were tested with the malfunctions to observe
the symptoms; quickly repaired; road tested again to assure
proper function; the malfunctions reinduced; and the vehicles
road tested for a final time to observe the symptoms.

After the vehicles had been so prepared, employees of the
attorney general and AAMCO presented the vehicles at the
DeWolf center, describing the characteristics of the automobile
as it performed with the induced malfunctions. In each case,
DeWolf and his employees failed to note the malfunctions and
failed to follow AAMCO procedures for determination of defects.
Rather, in direct contravention of suggested procedures, the
“customer” was told that an expensive transmission repair was
necessary even though the malfunction could have been corrected
for a nominal cost. Shortly thereafter, work was performed on
each automobile. Nevertheless, the originally induced minor mal-
functions were not corrected in two of the vehicles. The parts
removed from each automobile were obtained from DeWolf
under a search warrant and were introduced at trial.

On August 21, 1975, as a result of these events, AAMCO served
DeWolf with a notice terminating, effective immediately, the

100 es

franchise agreement between the parties. AAMCO applied for
and received a temporary restraining order halting DeWolf’s
business operations under the trade name AAMCO. DeWolf’s pe-
tition to dissolve the restraining order was denied by the district
court. Upon application to this court, a writ was issued directing
the trial court to dissolve the restraining order and to proceed im-
mediately with a trial on the declaratory and injunctive relief
requested by AAMCO.

Trial commenced on September 4, 1975, and the court entered
an order for judgment, accompanied by findings of fact and con-
clusions of law, on October 20, 1975. The trial court determined,
in part, that AAMCO had properly terminated DeWolf’s fran-
chise and permanently enjoined him from continuing to hold
himself out to the public as an AAMCO franchisee.

On appeal, DeWolf contends:

(1) The methods employed by the attorney general and
AAMCO, through their respective employees, to gather evidence
violate his rights under the so-called Minnesota privacy act.

(2) The failure of AAMCO to give 24-hour notice to correct
the alleged breaches of the franchise agreement is in violation
of statutory requirements and precludes termination of the fran-
chise.

(8) The evidence does not sustain the termination of the
franchise agreement.

I DeWolf concedes that he never raised the issue concerning
his rights under the so-called Minnesota privacy act, Minn. St.
15.162 to 15.169 before the trial court. It is a well-established
principle of appellate jurisdiction that assignments of error not
presented to the trial court for consideration will not be reviewed
on appeal. In Skinner v. Neubauer, 246 Minn. 291, 298, 74 N. W.
2d 656, 661 (1956), this court stated:

«“* * * Rule 59.01(6) of the Rules of Civil Procedure pro-
vides that a new trial may be granted. because of errors of law
occurring at the trial and objected to at the time or, if no objec-
tion need have been made at the trial, if the error is plainly as-

| 101

signed in the notice of motion. Since no objection was made at
the trial and this error was not assigned in plaintiff’s motion
for a new trial, it is evident that the error now cannot be used
as a basis for a new trial on appeal to this court.” See, also, 2
Hetland & Adamson, Minnesota Practice, Civil Rules Ann., p.
616.

DeWolf recognizes the general rule but argues that he falls
within an exception enunciated in Atwood v. Holmes, 229 Minn.
87, 41, 88 N. W. 2d 62, 65 (1949), a case which considered a fail-
ure to raise the affirmative defense of res judicata before the
trial court:

«k © © As an exception to the general rule that litigants are
usually bound upon appeal by the theory or theories, however
erroneous or improvident, upon which the case was tried below,
the appellate court has a duty to, and upon its own motion may,
consider and determine a case upon the ground of illegality, al-
though such ground was neither presented to nor considered by
the trial court, if such illegality (a) is apparent upon undisputed
facts, (b) is in clear contravention of the public policy, and (c)
if a decision thereon will be decisive of the controversy on its
merits.” See, also, 1B Dunnell, Dig. (8 ed.) § 384(7).

However, since the question presented by DeWolf is evidentiary
in nature and does not appear dispositive of the case on, its
merits, the general rule would appear applicable, barring any
attempt to raise it on appeal.

Further, we note that in Gruenhagen v. Larson, 310 Minn.
454, 458, 246 N. W. 2d 565, 568 (1976), we said:

«* * * Since what is at stake for Larson in the present case
is a property interest, rather than his liberty—let alone his life—
the instant case is readily distinguishable from the few cases in
which courts have sanctioned deviations from the basic prin-
ciple that an appellate court may not consider questions raised
for the first time on appeal.”

In conclusion, the case at hand appears very suitable for the

102 Le

application of the general rule foreclosing any consideration of
the applicability of the privacy act on ‘appeal.t

HM Minn. St. 800.14 provided the authority for the commis-
sioner of securities of the Department of Commerce to adopt
rules and regulations governing unfair and inequitable practices
which may occur in franchise relationships. Minn. Reg. SDiv
1714 was enacted pursuant to that authority. DeWolf relies spe-
cifically on Minn. Reg. SDiv 1714 (e) to support his argument
that AAMCO wrongfully terminated his franchise. Minn. Reg.
SDiv 1714 reads in part:

“All franchise contracts or agreements and any other device
or practice of a franchisor shall conform to the following provi-
sions. It shall be ‘unfair and inequitable’ for any person to:

ee ke ROK

“(e) Terminate or cancel a franchise without first having
given written notice setting forth all the reasons for such termi-
nation or cancellation to the franchisee at least 60 days in ad-
vance of such termination or cancellation, except that the notice
shall be effective immediately upon receipt where the alleged
grounds are:

ek kK KF

“(8) Failure to cure a default under the franchise agreement
which materially impairs the good will associated with the
franchisor’s tradename, trademark, service mark, logotype or
other commercial symbol after the franchisee has received writ-
ten notice to cure of at least 24 hours in advance thereof * * *.”

It is admitted by AAMCO, and clearly evident from the termi-
nation notice, that DeWolf was not afforded a 24-hour notice
prior to termination of his franchise. Failure to comply with
Minn. Reg. SDiv 1714(e) (3), argues DeWolf, amounted to an
unfair franchise practice by AAMCO and therefore his franchise
should be reinstated.

1 Although we fail to discuss this issue, our opinion should not be con-
strued as any indication of the merit of appellant’s claim.

| 108

The trial court did not agree with this argument. As a finding
of fact, the court determined:

“A twenty-four hour notice affording an opportunity to the
Defendant to remedy the conduct complained of herein or to cure
any damage as described in Franchise Regulation, SDiv 1714(e),
promulgated pursuant to Minn. Stat. § 80C.14 and .18 dated
January 13, 1975, would have been a futile and fruitless act for
the Plaintiffs.”

Also as a conclusion of law, the trial court held:

“The Plaintiffs are entitled to an Order immediately and per-
manently prohibiting the Defendant from operating under the
Plaintiffs’ name and trade marks. Plaintiffs have substantially
complied with Franchise Regulation SDiv 1714(e) as:

“A. A twenty-four hour notice to cure the breaches of the
Franchise Agreement would have been futile under the circum-
stances of this case.

“B. Defendant’s only remedy for violation of SDiv 1714(e)
is, as a matter of law, under the provisions of Minn. Stat.
800.14 injunctive relief to halt the termination of the franchise
agreement, which relief could in effect be granted in this action,
as Plaintiffs’ right to terminate the franchise agreement is at
issue herein.”

Thus, although recognizing the requirement of affording a
franchisee 24-hour notice prior to termination of a franchise,
the trial court felt, based on the facts in this case, that it would
be a futile gesture. A thorough examination of the record shows
that the trial court’s determination of this issue is amply sup-
ported by the evidence and not clearly erroneous. Rule 52.01,
Rules of Civil Procedure.

IB We find no merit in DeWolf’s contention that the evidence
does not sustain the trial court’s determination to terminate his
franchise.

Affirmed.

104

BURNER SERVICE AND COMBUSTION CONTROLS
COMPANY, INC. v. CITY OF MINNEAPOLIS.

250 N. W. 2d 224.

January 27, 1977 — No. 46626.

Carlsen, Greiner & Law and Jack D. Elmquist, for appellant.
Walter J. Duffy, Jr., City Attorney, and Frank C. LaGrange
and Jerome R. Jallo, Assistant City Attorneys, for respondent.

Heard before Todd, MacLaughlin, and Yetka, JJ., and con-
sidered and decided by the court en banc. .

YerKa, JUSTICE.

Burner Service and Combustion Controls 'Company, Inc.
(Burner), appeals from a judgment entered on January 22, 1976,
pursuant to an order by the district court granting the motion
for summary judgment of the city of Minneapolis and denying
Burner’s motion for summary judgment. We reverse.

‘The issue presented in this appeal is whether the city attorney
is, as a matter of law, without authority to bind the city to a
stipulation of settlement with a condemnee, while acting pur-

—— 105

suant to a resolution of the city council directing him to “take
all necessary steps to prepare for, institute, and prosecute on be-
half and in the name of the City of Minneapolis all such con-
demnation proceedings as may be necessary for the acquisition
by said City of Minneapolis [of Burner’s property interest], the
costs thereof to be paid from [funds authorized for this pur-
pose].”

This appeal arises out of a condemnation proceeding instituted
by the city of Minneapolis as part of a development district in
the Nicollet-Lake area where Burner leased property.

On November 22, 1972, the city council designated the Nicollet-
Lake area a development district. Shortly thereafter it author-
ized funding for the district. Walter J. Duffy, Jr., the city at-
torney, was authorized to purchase or condemn property in the
district.

On May 8, 1974, a condemnation proceeding was brought by
the city. The petition listed Burner as a respondent and recited
that the city attorney was. given authority to direct’ condemna-
tion proceedings on behalf of the city and that the city deemed
it necessary to secure the land under the “quick take” provision
of Minn, St. 117.042.1

The petition was heard on June 18, 1974, before Judge Edward
Parker, who allowed ,the condemnation to proceed but denied the
city’s request for a “quick-take” and immediate possession.

On December 12, 1974, Burner’s president, Thomas A. Ryan,

41 Minn. St. 117.042, provides: “Whenever the petitioner shall require
title and possession of all or part of the owner’s property prior to the
filing of an award by the court appointed commissioners, the petitioner
shall, at least 90 days prior to the date on which possession is to be
taken, notify the owner of the intent to possess by notice served by
registered mail and shall pay to the owner or deposit with the court an
amount equal to petitioner’s approved appraisal of value. If it is deemed
necessary to deposit the above amount with the court the petitioner
may apply to the court for an order transferring title and possession
of the property or ‘properties involved from the owner to the peti-
tioner.”

106

and an assistant city attorney signed a stipulation of settlement.
The settlement provided for payment of $15,778, allocating
$7,500 to the present value of Burner’s leasehold interest and’
$8,278 to Burner’s irremovable fixtures, in return for a quit
claim deed from Burner and the termination of Burner’s inter-
ests in the premises on March 29, 1975.

A problem developed on February 4, 1975, when the assistant
city attorney informed Burner’s attorney that the city would not
pay the portion of the settlement previously allotted to Burner’s
leasehold interest ($7,500) because an examination of Burner’s
lease disclosed a clause which, in the city’s opinion, terminated
Burner’s leasehold interest in the event of condemnation.

In response, Burner instituted an action in district court for
breach of the stipulation of settlement. Cross-motions for sum-
mary judgment were heard, and the city’s motion was granted
and Burner’s motion was denied. Burner appeals from the judg-
ment entered.

A motion for summary judgment may be granted only when
the pleadings, depositions, answers to interrogatories, and ad-
missions on file, together with affidavits, if any, show that there
is no genuine issue as to any material fact and that a party is en-
titled to a judgment as a matter of law. Rule 56.08, Rules of Civil .
Procedure ; Couillard v. Charles T. Miller Hospital, Inc. 253 Minn.
418, 92 N. W. 2d 96 (1958); 10 Dunnell, Dig. (3 ed.) § 4988b.

In Sauter v. Sauter, 244 Minn. 482, 484, 70 N. W. 2d 351; 353
(1955), this court stated the rules governing a motion for sum-
mary judgment as follows:

“A motion for a summary judgment may be granted pursuant
to Rule 56.03 only if, after taking the view of the evidence most
favorable to the nonmoving party, the movant has clearly sus-
tained his burden of showing that there is no genuine issue as
to any material fact and that he is entitled to judgment as a mat-
ter of law. It is essential to bear in mind that the moving party
has the burden of proof and that the nonmoving party has the
benefit of that view of the evidence which is most favorable to

re 107

him. The salutary purpose and useful function of summary judg-
ment proceedings as a means of securing the just, speedy, and
inexpensive determination of the action (Rule 1) is well recog-
nized, but resort to summary judgment was never intended to
be used as a substitute for a court trial or for a trial by jury
where any genuine issue of material fact exists. In other words
a summary judgment is proper where there is no issue to be tried
but is wholly erroneous where there is a genuine issue to try.

“The controlling words genuine issue and material fact need
no amplification since they best speak for themselves. Their ap-
plication in determining whether there is an absence of a genuine
issue as to a material fact requires a careful scrutiny of the
pleadings, depositions, admissions, and affidavits, if any, on file.
Since, however, all factual inferences must be drawn against the
movant for summary judgment, it follows that, even where the
movant’s supporting documents are uncontradicted, they may
in themselves be insufficient to sustain his burden of proof.”

Thus, in view of these governing principles, the granting of
the city’s motion for summary judgment can be upheld only
under one of two circumstances: (1) if, as a matter of law, a city
attorney may not bind the city to a stipulation of settlement
under any circumstances; or (2) if such authority may exist,
the facts before us raise no genuine issue as to the actual authori-
zation of the city attorney to enter into a settlement on behalf
of the city.

The city contends that the signing of the stipulation of settle-
ment by the city attorney was the attempted performance of a
nondelegable duty of the city, and as such, no legal effect can be
given to the city attorney’s acts. The city further contends that
Burner must be presumed to know the extent of the power of the
officers with whom it dealt and is thus precluded from arguing
either actual authority or estoppel premised on actions within
the permissible scope of the officer’s authority.

Burner, on the other hand, contends that the city attorney not
only had the power but also the specific authorization to settle

108 . es

under the condemnation action initiated by the city attorney
under the direction of the city council.

In granting the city’s motion for summary judgment, the trial
court agreed with the city’s position. It found that the signing
of the settlement agreement by the city ‘attorney involved the
attempted delegation of a nondelegable duty, stating in its memo-
randum:

“In Wilson v. Minneapolis, 283 Minn. 348, 168 N. W. 2d 19
(1969), the Minnesota Supreme Court held that municipal of-
‘ficers cannot go beyond the authority given them by law, nor
delegate powers involving judgment or discretion. In other
words, the City Council cannot delegate its powers that call for
judgment or discretion on its part, but must exercise those
powers itself.

«# * * Tt is this Court’s opinion that a decision to pay money
out of the City’s Treasury in a condemnation proceeding is a
power involving judgment or discretion by the City Council and,
therefore, must be exercised solely by the City Council and not
by anyone presumably or actually having received authority to
make that decision for the City Council.

‘se * * Since this Court has already determined that the City
Council alone had power to deal with any condemnation awards,
no representative from the City Attorney’s office could obligate
the City Council to the stipulation in this case, regardless of the
fact that plaintiff may have relied on that representative’s ac-
tion.” (Italics supplied.)

Both the trial court and the city rely on provisions of the Min-
neapolis City Charter for their conclusion that the city is without
authority to enter into stipulation agreements involving con-
demnation. Minneapolis City Charter, c. 4, § 14, provides:

“The City Council shall have the management and control
of the finances and all property of the city * * *.”

Minneapolis City Charter, c. 5, § 26, also provides:
“No money shall be paid out of the City Treasury, except for

ee 109

principal or interest of bonds, unless such payment shall be au-
thorized by a vote of the City Council, and shall then be drawn
out only upon orders signed by the Mayor and Clerk and counter-
signed by the Comptroller-Treasurer, which orders shall spec-
ify the ‘purpose for which they were drawn, and the funds out
of which they are payable, and the name of the person in whose
favor they may be drawn, and may be made payable to the order
of such person or to the bearer, as the City Council may deter-
mine.”

Minneapolis City Charter, c. 4, § 15, further states:

“The City Council shall have the power to acquire by purchase
or condemnation such private property as may be necessary for
sites for public buildings for the use of the city and all depart-
ments thereof, for all structures connected with any department
of the city, and for all streets, alleys and public squares in the
city, and to ascertain and determine the value of all such pri-
vate property taken for such uses, and the amount of all damages
occasioned to any private property by reason of any public works
or structures, and for that purpose may appoint commissioners
to appraise such value or damages, or acquire information there-
of in any other manner it shall deem advisable.”

From these provisions the city concludes that the city attorney
is, as a matter of law, without authority to enter into a stipula-
tion of settlement.

However, the real issue here, as stated by Burner, is: not
whether there was a redelegation of authority by the city to the
city attorney, but rather whether there had been an actual exer-
cise of the power by the city itself. The distinction between re-
delegation and actual exercise is noted in 1 Nichols, Eminent Do-
main (Rey. 3 ed.) § 3.211[1], which states:

“Where the power of eminent domain has been granted to a
municipality it is questionable whether the latter has the right
to redelegate such power to a subordinate city agency or official.
The grant of power by the state is to the city and not to any

110 as

board or commission of the city. The municipality has no in-
herent power of eminent domain but acquires its right to deal
with the subject from the state. It does not acquire the right to
redelegate by implication from its delegated powers as set forth
either in a statute or its charter, although it may be given ex-
press power to do so. It is equally without power to give itself
the right to redelegate the power by a municipal ordinance. How-
ever, a resolution of the city council which authorizes a city at-
torney to acquire land for a municipal purpose is not construed
as a redelegation of the power of eminent domain, but merely
as an official authorization by the city of an exercise by the city,
in its own right, of the delegated power of eminent domain. Since
it is a corporate entity it can act only through its officers or
agents so far as ministerial or administrative acts are con-
cerned.” (Italics supplied.)

The cases cited by the trial court stand for the well-established
rule that an officer or agent of a municipality cannot bind’ the
city when he acts beyond the scope of his lawful powers. How-
ever, none of these cases offer much assistance in determining
what those lawful powers are, and thus are not of assistance
here.

In determining whether, as a matter of law, the city attorney
has the authority to enter into a stipulation of settlement, it
should be noted first that what is involved is the scope of the

‘powers of an attorney. In 62 C. J. S., Municipal Corporations,
§ 695, p. 1387, this rule is stated:

“A city attorney exercises the ordinary functions of retained
Jawyers, and may bind the city to that extent, but, ordinarily,
the attorney for the municipality has no greater power in this
regard. In the absence of special authority, he cannot bind the
city by a compromise of claims, except possibly in an emergency,
+ oD

Also, in West v. Bank of Commerce & Trusts, 167 F. 2d 664, 666
(4 Cir. 1948), the court stated the rule as follows:

| iw

«“* * * The ordinary rule is that an attorney at law has no
authority, without his client’s permission, to. compromise his
client’s claim and this rule seems to apply to attorneys for mu-
nicipalities as well as to attorneys for private individuals.”

A case which illustrates the workings of the rule and which in-
volves analogous facts is Richardson v. City of Seattle, 97 Wash.
371, 166 P. 689 (1917). The city of Seattle contended that its city
attorney was without authority to enter into a binding stipula-
tion made during the course of a condemnation trial. In rejecting
the city’s claims, the court stated (97 Wash. 377, 166 P. 641):

«* * %* [The city] contend[s], however, that the corporation
counsel of the city of Seattle had no authority to enter into such
a stipulation as that made at the condemnation trial, and that
the city could not be bound thereby. That contention cannot be
sustained. The corporation counsel was a duly authorized repre-
sentative of the city to act for it in all trials and proceedings at
law. It is a general rule that a party to an action is bound by the
stipulations and agreements entered into by his counsel in open
court as a part of the proceedings in the cause, and the acts and
doings of the attorney are the acts and doings of the client. 4 Cyc.
934, 935; 2 R. C. L. § 68, p. 986; Coonan v. Loewenthal, 129 Cal.
197, 61 Pac. 940. If the corporation counsel had, no authority to
make such stipulation, he had no authority to proceed in any way
during the trial, unless each step that he took was first au-
thorized by the legislative or political body of the city.”

Thus, a city attorney is placed in no lesser position as such to
settle or compromise claims merely because his client is a mu-
nicipal corporation rather than a private corporation or an indi-
vidual. We cannot hold that a city attorney, as a matter of law,
cannot be given the authority to bind the city to a stipulation of
settlement. Therefore, we must turn to the authority given to
the city attorney in this particular case.

Except in an emergency, an attorney has no authority to enter
into a stipulation to settle and compromise a cause of action with-

112 ee

out the knowledge or consent of his client. Matteson v. Blaisdell,
148 Minn. 352, 182 N. W. 442 (1921); Gibson v. Nelson, 111
Minn. 188, 126 N. W. 731 (1910). However, an, attorney may be
authorized expressly to compromise a claim of his client. See,
Ghostley v. Hetland, 295 Minn. 876, 204 N. W. 2d 821 (1978) ;
Albee v. Hayden, 25 Minn. 267 (1878).

The powers and duties of the city attorney are set out in Min-
neapolis City Charter, c. 8, § 5, as follows:

“The City Attorney and his assistants shall constitute the legal
department of the City of Minneapolis, and shall have charge
of all legal matters connected with the city government and all
the several heads and departments of the same, and of the several
boards of said city which now exist or are hereafter established
in connection with the city government.

“The City Attorney shall be the head of such legal department
and shall have the control, supervision and direction of all mat-
ters of such department. He shall be the legal advisor of the
Mayor, City Council, its committees and all other officers of the
city and of the boards hereinabove named. He shall, either per-
sonally or by such assistance as he may designate, render and
perform all the legal services incident to the legal department
eka

In addition, the city’s condemnation petition of May 8, 1974,

contained the following paragraph:

“That at a regular meeting of the City Council of the City of
Minneapolis, held on April 26, 1974, the said City Council regu-
larly adopted the following resolution by Alderman Miller:

* % ee #

“BE It FURTHER RESOLVED that the City of Minneapolis acquire
either fee simple title to, or sufficient interests in, said prop-
erties by gift, lease, purchase or condemnation proceedings in
the manner provided by law, in accordance with Minnesota Stat-
ute 459.14, Chapter 677 Laws of Minnesota 1971 as amended by
Chapter 357 Laws of Minnesota 1974 and Minnesota Statute 117

| 118

to provide the necessary facilities; and that the City Attorney
pe and is hereby authorized and directed to take all necessary
steps to prepare for, institute, and prosecute on behalf and in
the name of the City of Minneapolis all such condemnation pro-
ceedings as may be necessary for the acquisition by said City of
Minneapolis of the above described property for the purpose
above stated, the costs thereof to be paid from the Development
District Fund (34-21).” (Italics supplied.)

In our opinion there is little doubt that by this resolution the
city council gave authority to the city attorney to acquire the
property from Burner and to agree to the prices to be paid for
it. Neither the resolution of the city council nor the stipulation

‘itself conditioned the stipulation’s effectiveness on council ap-
proval. Moreover, the record is devoid of any indication of fraud
or mutual mistake in the execution of the stipulation. Therefore,
on the facts of this case, we hold that the city is bound by the
stipulation. .

We do not hold that a city attorney can in every instance, even
when clothed with the apparent authority to negotiate and settle,
make an outrageous settlement where it would be apparent to
any reasonable person that the settlement is wholly without
justification and therefore is without the consent, express or im-
plied, of the city council. But such are not the facts of this case.

Reversed and remanded with instructions to enter summary
judgment for appellant for the amount of the award agreed to
in the stipulation of settlement, plus costs and disbursements.

114 ee
LYNDER LAMBERTSON v. CINCINNATI CORPORATION.
HUTCHINSON MANUFACTURING AND SALES,

INC., THIRD-PARTY DEFENDANT.

257 N. W. 24 679,

February 4, 1977 — Nos. 45790, 45810.

115

Lasley, Gaughan, Reid & Stich and Robert T. Stich, for appel-
lant.

Meagher, Geer, Markham, Anderson, Adamson, Flaskamp &
Brennan, O. C. Adamson II, and Mary Jeanne Coyne, for re-
spondent plaintiff.

Fitch & Johnson and Raymond W. Fitch, for respondent third-
party defendant. .

SHERAN, CHIEF JUSTICE.

Cincinnati Corporation, defendant and third-party plaintiff
in a personal injury/product liability action, appeals from a judg-
ment of the district court which awarded a worker $34,000 in
damages but denied defendant manufacturer contribution from
an employer which was partly at fault for the accident. We
reverse in part and remand with instructions.

Cincinnati is the manufacturer of a press brake, a large ma-
chine used for bending metal. The break has a large vertical ram
which moves up and down. Dies are placed on the ram and on
the bed of the machine, and metal to be bent is placed between
the ram and the bed. When the ram comes down onto the metal,
a bend, or brake, is made in the metal at the point where the
die on the ram matches the die in the bed. The movement of the
ram is controlled by the operator by means of a single foot pedal
at the base of the machine.

116 Le

Cincinnati sold a press brake to Hutchinson Manufacturing
and Sales, Inc., plaintiff's employer. On April 25, 1972, plaintiff
was assisting a coemployee in the operation of the press brake.
The coemployee was controlling the foot pedal, and plaintiff was
placing long metal strips between the ram and the bed and re-
moving them after they had been bent. As the ram was being
raised after one cycle, a piece of metal which had been bent fell
to the side of the bed opposite to the side where plaintiff was
working. Plaintiff reached through the jaws of the machine to
retrieve the piece of metal, but his coemployee had kept his foot
on the pedal, thus permitting the ram to descend again, crush-
ing plaintiff’s arm between the ram and the bed.

After recovering workers’ compensation from Hutchinson,
plaintiff brought this action against Cincinnati. Plaintiff testi-
fied that he had never operated the press brake before and did
not know it was capable of double cycling, ie., continuing
through another cycle without the ram’s stopping at the top. He
testified that he knew he should not have put his arm between
the jaws, but that he did not know that his coemployee still had
his foot on the pedal or that the ram would descend again before
he could retrieve the piece of metal.

Plaintiff introduced expert testimony and safety rules, and
regulations from which the jury could have found that certain
safety devices and features could have been installed on the press
brake at the time of its manufacture and sale to Hutchinson in
1967, and that such devices would have prevented the accident.
Sufficiency of this evidence to support a finding of negligence
on the part of Cincinnati is not contested on this appeal.
Cincinnati does, however, ask for indemnity from Hutchinson
based on events occurring after 1967.

In 1969, after representatives of ‘Cincinnati viewed the partic-
ular uses to which the press brake was put at Hutchinson,
Cincinnati offered to Hutchinson (at Hutchinson’s expense) two
changes in the machine: (1) Operation by two or more palm but-
tons or foot switches; (2) automatic stoppage of the ram at the

— ee 117

top of the cycle—i. e., no double cycling. These changes apparent-
ly were declined. In 1971, Cincinnati sent out a sales pamphlet
to all owners of its press brakes describing a Waveguard safety
device, an electronic sensing device designed to detect foreign
matter in the press and stop the press if such matter were
present. Hutchinson did not order or install such a device. There
was testimony by plaintiff's expert from which one could con-
clude that the absence of two of these offered features—the
automatie stop and the electronic sensor—constituted defects
in the machine that were causally related to this accident.

When plaintiff’s left forearm was crushed in the press brake,
both bones were broken in such a way that the lower part of the
arm was at a 90-degree angle to the upper part. It took 5 to.6
minutes to reverse the press and extricate his arm. He reported
considerable pain. The fractures were surgically set and he was
hospitalized initially for 10 days. During the succeeding 2 months
his cast had to be removed and replaced 5 times so that the wound
could be cleaned and X-rays taken. The fractures did not unite
properly, and subsequent surgery was necessary. The bones were
reset, using steel plates and screws. Plaintiff remained in a cast
until February 1973, received medication for pain, and under-
went physical therapy to regain the use of his arm. He was un-
able to work for a year after the accident and sustained an ap-
proximately $6,000 wage loss plus $2,600 in medical expenses.

The case was submitted to the jury on special verdict on a
theory of negligence. The jury found all parties causally negli-
gent and apportioned their comparative negligence as follows:
Plaintiff—i5 percent; Cincinnati—25 percent; Hutchinson—60
percent. The jury found damages of $40,000. The trial court
ordered judgment against Cincinnati for $34,000, the full amount
of the verdict less 15 percent for plaintiff’s: negligence, and
denied Cincinnati’s claim for contribution or indemnity from
Hutchinson.

Four issues are raised on appeal:

(1) Did the trial court err in admitting certain safety regula-
tions and excluding others?

118 a

(2) Did the trial court err in refusing to instruct on assump-
tion of risk?

" (8) Was the jury’s award of $40,000 damages excessive?

(4) Did the trial court err in refusing to grant contribution
or indemnity to Cincinnati?

HE Cincinnati challenges three evidentiary rulings of the trial
court: (1) Admission of a 1960 American Standard Safety Code
section on power presses; (2) withdrawal of a 1971 American
National Safety Standard Requirement; and (3) exclusion of
a 1973 American National Standard Safety Requirement for
the Construction, Care and Use of Power Press Brakes. The trial
court adopted a consistent approach in ruling on the proffered
‘safety standards. It excluded all standards promulgated after
1967, the date of manufacture of the press involved in the instant
case, apparently on the theory that Cincinnati could not be held
accountable for such standards. It admitted the 1960 standard,
based on expert testimony that it applied to Cincinnati’s 1967
press. The manufacturer made no offer of proof below nor any
argument in this court that shows the trial court’s approach to
be so clearly wrong as to constitute an abuse of its broad discre-
tion in deciding upon the relevancy of evidence. Since no such
showing is made, we reject the manufacturer’s argument.

WH Cincinnati further assigns as error the failure of the trial
court to instruct on assumption of risk. Since this was a post-
Springrose v. Willmore (292 Minn. 28, 192 N. W. 2d 826 [1971])
case, assumption of risk would not have been submitted as a
separate defense in any event, but would have been apportioned
with comparative negligence. In our recent decision in Evanson
v. Jerowski, 308 Minn. 118, 241 N. W. 2d 636 (1976), we ap-
proved and applied the definition and elements of assumption
of risk as set forth in 4 Hetland & Adamson, Minnesota Practice,
Jury Instruction Guides (2 ed.), Instruction 185 S:

“Assumption of risk is voluntarily placing (oneself) (one’s
property) in a position to chance known hazards. To find that
a person assumed the risk you must find:

— 119

“1. That he had knowledge of the risk.

“2, That he appreciated the risk.

“3. That he had a choice to avoid the risk or chance it and
voluntarily chose to chance it.” (Italics supplied.)

Applying this test, there is no evidence in the record that the
employee voluntarily chose to encounter a known risk. The em-
ployee testified that he did not know that his coemployee’s foot
was still on the pedal and that he did not know that the machine
could double cycle without stopping. While the employee did ex-
claim in the moments immediately following his injury that he
should not have reached through the machine, the manufacturer
points to no evidence that would permit a jury to infer that he
was fully aware of how the machine operated and yet tried to
reach in and out fast enough to avoid the ram. Absent this kind
of evidence, a line of recent decisions of this court holds that sub-
mission of or a finding of assumption of risk is improper. See,
e. g., Olson v. Hansen, 299 Minn, 39, 216 N. W. 2d 124 (1974);
Vanden Broucke v. Lyon County, 801 Minn. 899, 222 N. W. 24
792 (1974) ; Parr v. Hamnes, 308 Minn. 838, 228 N. W. 2d 234
(1975). Therefore, failure to instruct on assumption of risk was
not error in the instant case.

HI Defendant also asserts that the damage award was exces-
sive. The trial court has broad discretion in determining whether
a new trial should be granted for excessive damages. Bisbee v.
Ruppert, 306 Minn. 39, 285 N. W. 2d 864 (1975). Here, there
‘were $8,000 to $9,000 of special damages, two operations, a year’s
absence from work, evidence of extreme pain, and evidence of
a continuing 15-percent disability despite current employment.
In light of these facts, the trial court reasonably found that
$40,000 was not excessive.

i The final and most important issue in this case concerns
the claim of Cincinnati, a third-party tortfeasor, for indemnity
or contribution from Hutchinson, plaintiff’s employer. This issue
is a troublesome one and has generated a substantial amount of
debate in the bench and bar of this and other states. Arthur Lar-

120

son, a leading commentator on workmen’s compensation law, has
called the controversy surrounding indemnity and contribution
against employers in third-party actions “[p]erhaps the most
evenly-balanced controversy in all of compensation law.” 2A Lar-
son, Workmen’s Compensation Law, § 76.10. The essence of the
controversy is this: If contribution or indemnity is allowed, the
employer may be forced to pay his employee—through the con-
duit of the third-party tortfeasor—an amount in excess of his
statutory workers’ compensation liability. This arguably thwarts
the central concept behind workers’ compensation, i. e., that the
employer and employee receive the benefits of a guaranteed,
fixed-schedule, nonfault recovery system, which then constitutes
the exclusive liability of the employer to his employee. See, Minn.
St. 176.081. If contribution or indemnity is not allowed, a third-
party stranger to the workers’ compensation system is made to
bear the burden of a full common-law judgment despite possibly
greater fault on the part of the employer. This obvious inequity
is further exacerbated by the right of the employer to recover
directly or indirectly from the third party the amount he has paid
in compensation regardless of the employer’s own negligence.
Minn. St. 176.061, subds. 5, 6(d). See, Nyquist v. Batcher, 235
Minn. 491, 51 N. W. 2d 566 (1952). Thus, the third party is
forced to subsidize a workers’ compensation system in a propor-
tion greater than his own fault and at a financial level far in ex-
cess of the workers’ compensation schedule.

The even balance in this controversy results from conflicts
among the policies underlying workers’ compensation, contribu-
tion/indemnity, and comparative negligence and the fault con-
cept of tort recovery. Workers’ compensation, a creature of Min-
nesota law since 1913, subjects almost all employers and em-
! ployees to an essentially nonfault recovery system for accidents
arising out of and in the course of employment. In exchange for
guaranteed compensation for injury regardless of his own fault
or the solvency of at-fault fellow employees, the employee is.
limited to a fixed schedule of recovery and gives up any right

— 121

to a common-law action against the employer. See, Minn. St. 176.-
021, 176.081. This court has indicated on many occasions that
the purpose of workers’ compensation is broadly remedial and
that workers’ compensation laws are to be construed to favor
employee recovery of benefits. Carey v. Stadther, 300 Minn. 88,
219 N. W. 2d 76 (1974); Sandmeyer v. City of Bemidji, 281
Minn. 217, 161 N. W. 2d 318 (1968); Nyberg v. Little Falls Black
Granite Co. 192 Minn. 404, 256 N. W. 732 (1934); Kaletha v.
Hall Mercantile Co. 157 Minn. 290, 196 N. W. 261 (1928).
Despite its essential nonfault character, the workers’ compen-
sation system retains an important common-law aspect—the
third-party action. See, Minn. St. 176.061. The employee, and
in some instances the employer, is allowed to bring an action
against a third party who is legally responsible for the em-
ployee’s injury. Such an action accomplishes two beneficial re-
sults for the workers’ compensation system: (1) The at-fault
third party is made to reimburse the employer who has been
forced to bear the cost of the third party’s activity; and (2) the
employee obtains a full common-law recovery against the third
party, who is not subject to the benefits and burdens of the work-
ers’ compensation system. While some states have placed the
former result first in importance and have decreed that the em-
ployer must be reimbursed for all compensation benefits before
the employee receives anything from a, third-party judgment
(see, 2A Larson, Workmen’s Compensation Law, § 74.31), Min-
nesota has given paramount importance to the latter object in
mandating that the employee receive a third of the judgment
after litigation expenses are paid and before the employer can
collect compensation paid. Minn. St. 176.061, subd. 6, provides:

“The proceeds of all actions for damages or settlement there-
of under section 176.061, received by the injured employee or
his dependents or by the employer as provided by subdivision
5, shall be divided as follows:

“(a) After deducting the reasonable cost of collection, in-

122 es

cluding: but not limited to attorneys fees and burial expense in
excess of the statutory liability, then

“(b) One-third of the remainder shall in any event be paid
to the injured employee or his dependents, without being sub-
ject to any right of subrogation.

“(e) Out of the balance remaining, the employer shall be
reimbursed for all compensation paid under chapter 176.

“(d) Any balance remaining shall be paid to the employee
or his dependents, and shall be a credit to employer for any com-
pensation which employer is obligated to pay, but has not paid,
and for any compensation that such employer shall be obligated
to make in the future.

“There shall be no reimbursement or credit to employer for
interest or penalties,”

In summary, the interests of the respective parties in the
workers’ compensation system are therefore as follows: The em-
ployer has a primary interest in limiting his payment for em-
ployee injury to the workers’ compensation schedule and a second-
ary interest in receiving reimbursement when a third party has
caused him to incur obligations to his employee. See, Nyquist v.
Batcher, swpra. The employee has a primary interest in receiving
full workers’ compensation benefits and, to the extent a third
party has caused him injury, a common-law recovery from that
third party.

In contrast, the third party’s interest is that of any other co-
tortfeasor—to limit its liability to no more than its established
fault. This interest is vindicated through contribution or in-
demnity. Contribution and indemnity are variant common-law
remedies used to secure restitution and fair apportionment of
loss among those whose activities combine to produce injury. As
this court stated in Hendrickson v. Minnesota Power & Light
Co. 258 Minn. 368, 370, 104 N. W. 2d 848, 846 (1960):

“The principles governing contribution and indemnity are
similar both in origin and in character. In modern law these prin-

ee 123

ciples comprise the subject that is treated under the general title
of restitution. The principles of restitution are derived from the
old common-law actions of general assumpsit and those which
we now call quasi-contract and from the equitable principles of
unjust enrichment. The basis of the right to restitution is the
belief that men should restore what comes to them by mistake
or at another’s expense, and that it is unfair to retain a benefit
or advantage which should belong to another. This statement
is, however, merely a generalization of the more specific prin-
ciples underlying the subject. Like most generalizations, this is
too vague to be of much assistance in the determination of spe-
cific cases. Although both contribution and indemnity rest upon
this common concept, they are significantly different in specific
application.

“Contribution is the remedy securing the right of one who has
discharged more than his fair share of a common liability or
burden to recover from another who is also liable the propor-
tionate share which the other should pay or bear. Contribution
rests upon principles of equity. Indemnity is the remedy secur-
ing the right of a person to recover reimbursement from another
for the discharge of a liability which, as between himself and
the other, should have been discharged by the other. Indemnity
is generally said to rest upon contract, either express or implied.
However, there are numerous exceptions and situations in which
a contract is implied by law, and contract, therefore, seems to
furnish too narrow a basis. In the modern view, principles of
equity furnish a more satisfactory basis for indemnity.

“Contribution and indemnity are variant remedies used when
required by judicial ideas of fairness to secure restitution. Al-
though similar in nature and origin and having a common basis.
in equitable principles, they differ in the kind and measure of
relief provided. Contribution requires the parties to share the
liability or burden, whereas indemnity requires one party to
reimburse the other entirely. Differing thus in their effect, these
remedies are properly applicable in different situations. Contri-

124 be

pution is appropriate where there is a common liability among
the parties, whereas indemnity is appropriate where one party
has a primary or greater liability or duty which justly requires
him to bear the whole of the burden as between the parties.”
When one tortfeasor has paid or is about to pay more than his
equitable share of damages to an injured party, he has an inter-
est in obtaining indemnity or contribution from his fellow tort-
feasors.

Comparative negligence, which is embodied in Minn. St. 604.01
and was substantially borrowed from our sister state of Wiscon-
sin in 1969, introduces yet another dimension to the third-party
tortfeasor’s predicament. By abolishing the defense of contribu-
tory negligence in cases where plaintiff’s percentage of total caus-
al negligence is less than defendant’s, it permits an injured
workman to recover against the third party more frequently.
In addition, Minn. St. 604.01, subd. 1, specifies a rule for contri-
bution:

«* * & When there are two or more persons who are jointly

liable, contributions to awards shall be in proportion to the per-
centage of negligence attributable to each, provided, however,
that each shall remain jointly and severally liable for the whole
award.”
Thus, a jointly liable tortfeasor has an interest, at least where
the other tortfeasors are solvent and otherwise available for con-
tribution, in contributing no more to the plaintiff's recovery than
the percentage of negligence attributable to him.

This court has encountered the problems caused by the con-
flicting interests of tort and compensation law on several occa-
sions. In Lunderberg v. Bierman, 241 Minn. 349, 63 N. W. 2d 855
(1954), the owner of an automobile entrusted the automobile
to a garage and an employee of the garage was injured through
the negligent operation of the vehicle by a coemployee. When the
injured employee brought an action against the owner of the
automobile under the Safety Responsibility Act, we allowed the

— 125

owner indemnity against the garage-employer notwithstanding
the fact that’ workers’ compensation had also been paid by the
employer. We noted that the Workers’ Compensation Act did not
limit the rights of third parties, at least on the facts presented
(241 Minn. 363, 63 N. W. 2d 365):

“At first blush it might seem that there is merit to the argu-
ment that to permit the employee to recover of a third person,
and then allow such person to recover indemnity of the employer
when the employee could not sue the employer, is to extend the
liability of the employer beyond that limited by the workmen’s
compensation act. The answer to this argument is that the work-
men’s compensation act does not encompass or limit the rights
of third parties against the employer nor is there any reason why
it should do so. The liability here attaches to Mrs. Bierman only
by virtue of the financial responsibility act [Safety Responsi-
pility Act]. She was guilty of no act of negligence causing such
liability. She should not be deprived of a right to seek indemnity
from one actively responsible for the injury simply because the
employee’s right to sue the employer is limited by the workmen’s
compensation act. The words ‘or any other person’ in our statute
must be réad in connection with the rest of the act and refer to
other persons who have a right to sue for the injuries sustained
by the employee. The workmen’s compensation act gave to both
the employee and the employer some benefits which they did not
have under the common law. In return therefor they surrendered
some of the advantages which they had under the common law.
McGough v. McCarthy Improvement Co. 206 Minn. 1, 287 N. W.
857. That is not true of a third party standing in the position of
Mrs. Bierman. She gained nothing by the workmen’s compensa-
tion act and, consequently, should not be deprived of a right
which she would have under the common law.”

See, also, Cooper v. Watson, 290 Minn. 362, 187 N. W. 2d 689
(1971).

We subsequently refused, however, to allow contribution to

third parties. In Hendrickson v. Minnesota Power & Light Co.

126, ee

258 Minn. 368, 104 N. W. 2d 848 (1960), this court denied re-
covery to a third-party tortfeasor seeking contribution or in-
demnity from a negligent employer. The court held: (1) There
was no right of contribution because there was no common lia-
bility to the employee, i. e., the employer was not liable in tort
to the employee because of the exclusive-remedy provision of our
workers’ compensation law; (2) there was no right of indemnity
because the facts did not fall within one of the exceptional situ-
ations in which indemnity is allowed, unlike the facts in Lunder-
berg.

In the years following Hendrickson, this court also upheld an
award of indemnity against an employer who had breached con-
tractual duties to observe safety rules and an express contract
of indemnity. In Keefer v. Al Johnson Construction Co, 292
Minn. 91, 100, 193 N. W. 2d 305, 310 (1971), we commented that
the negligence of the third party was imputed or vicarious as
compared with the active negligence of the employer. But we re-
affirmed, in Froysland v. Leef Bros. Inc. 298 Minn. 201, 197
N. W. 2d 656 (1972), the rule of Nyquist v. Batcher, 235 Minn.
491, 51 N. W. 2d 566 (1952), and held that the employer’s con-
tributory negligence was not available to the third party as a de-
fense, since the rights of the employee in the third-party action
were primary. Froysland did not involve any claim of indemnity.

In Haney v. International Harvester Co. 294 Minn. 375, 201
N. W. 2d 140 (1972), we reviewed prior Minnesota case law and
comprehensively analyzed the predicament of the third-party
tortfeasor. We concluded that Minn. St. 176.061, subd. 10 (L.
1969, c. 986, § 4), which declared that “the employer shall have
no liability to reimburse or hold such third person harmless
* * * in absence of a written agreement to do so executed prior
to the injury,” raised due process problems. The case was re-
manded for a factual record to develop the constitutional argu-
ments; it was settled on remand. In Carlson v. Smogard, 298
Minn. 362, 215 N. W. 2d 615 (1974), the court struck down
§ 176.061, subd. 10, as violative of the due process clause of the

Eee 127

Fourteenth Amendment to the United States Constitution and
art. 1, § 8, of the Minnesota Constitution. We found that the stat-
ute took away a common-law remedy without providing a rea-
sonably just substitute, and that it did not foster any legitimate
legislative objective.

The problem of indemnity/contribution in third-party cases
was most recently raised in Halvorson v. American Hoist & Der-
rick Co. 307 Minn. 48, 240 N. W. 2d 303 (1976), but a complete
discussion of the issue was avoided by our holding that the third
party was not chargeable, as a matter of law, with negligence.
The legislature has not provided any substitute for the common-
Jaw remedy since Carlson, and the problem is renewed in this
case.

Cincinnati initially seeks indemnity from Hutchinson chiefly
on the ground that it offered safety devices to Hutchinson which,
if installed on the press brake, could have prevented the accident.
The difficulty with this argument lies in the jury’s unchallenged
finding that Cincinnati was 25-percent negligent in the first in-
stance, when it placed its press brake in the stream of commerce
without certain kinds of safety devices. Since the independent
acts of negligent manufacture and sale by Cincinnati and refusal
of safety devices by Hutchinson combined to produce plaintiff's
injury, liability should be apportioned between them, not shifted
entirely to one or the other. Therefore, if Cincinnati is entitled
to any remedy, that remedy is contribution.

Cincinnati’s claim for contribution, however, confronts two
further problems: (1) Our holding in Hendrickson v. Minnesota
Power & Light Co. 258 Minn. 368, 104 N. W. 2d 843 (1960), that
contribution is not available because of the absence of a common
liability; and (2) the policy interest of the employer in paying
no more than his workers’ compensation liability because of an
employee injury and the other conflicting policies and statutes
discussed earlier in this opinion.

Considering the first of these problems, we cannot find any
continuing persuasive force in the reasoning of the court in

128 Es

Hendrickson. That reasoning proceeded, in the words of the
court, as follows (258 Minn. 874, 104 N. W. 2d 849):

“It is argued on behalf of defendant Gabrielson that having
paid workmen’s compensation benefits to dependents of dece-
dent he is exonerated by the Workmen’s Compensation Act from
liability to any other person arising out of the injury or death
of his employee. However, this court has long held that the Work-
men’s Compensation Act is intended to control only the rights
between employer and employee and does not by its terms pre-
vent contribution or indemnity where appropriate. This also
seems to be the general rule. Nevertheless, the act does affect
the right to contribution where the concurrent negligence of the
employer and a third party causes injury to an employee. Since
workmen’s compensation statutes. provide that the obligations
thereunder are the only liability of the employer to the employee,
or his representatives, there is no common liability involving the
employer and third party in such situations; and therefore, there
is no ground for allowing contribution.”

While there is no common liability to the employee in. tort, both
the employer and the third party are nonetheless liable to the em-
ployee for his injuries; the employer through the fixed no-fault
workers’ compensation system and the third party through the
variable recovery available in a common law tort action. Contri-
bution is a flexible, equitable remedy designed to accomplish a
fair allocation of loss among parties. Such a remedy should be
utilized to achieve fairness on particular facts, unfettered by out-
worn technical concepts like common liability.

The second problem confronting Cincinnati’s claim is a more
formidable one. The equitable merit in Cincinnati’s claim is
plain: It has been forced to bear the entire burden of plaintiff's
recovery despite the fact that it was only 25-percent negligent
and has a 60-percent-negligent employer joined in the action and
available for contribution. In contrast, granting contribution
would result in substantial employer participation in its em-

eee 129

ployee’s common-law recovery despite the exclusive-remedy
clause. This problem is, in large part, a legislative one which de-
mands a comprehensive solution in statutory form. See, Note,
1 Wm. Mitchell L. Rev. 184, 160. The problem is discussed in Lar-
son, Workmen’s Compensation: Third Party’s Action Over
Against Employer, 65 Nw. U. L. Rev. 351, 419:

“The phrase most frequently heard in arguments against re-
covery over by the third party against the employer is this: the
allowance of such recovery over accomplishes indirectly what
cannot be done directly and, therefore, evades the spirit of the
legislation. This is not entirely accurate, for it does not tell the
whole story. True, the end result is that a common-law size re-
covery proceeds from the employer to the employee. In the
process, however, two things are accomplished, one of which is
relevant to the purposes of the compensation provision and the
other of which is independent of it. The relevant accomplish-
ment is that of preserving the employee’s common-law rights
against negligent outsiders. This having been done, there still
remains the job of adjusting rights fairly between the outsider
and the negligent employer. The question here becomes very pre-
cise: did the compensation acts, in conferring immunity on the
employer from common-law suits, mean to do so only at the ex-
pense of the injured employee, or also at the expense of out-
siders? One answer is that whereas the injured employee got quid
pro quo in receiving assured compensation payments as a substi-
tute for tort recoveries, the third party has received absolutely
nothing and, hence, should not be impliedly held to have given
up rights which he had before. It is unfair, so the argument runs,
to pull the third party within the principle of mutual sacrifice
when his part is to be all sacrifice and no corresponding gain.

“A situation like this ought to be dealt with legislatively. It
is rather inconsiderate to force courts to speculate about legisla-
tive intention on the strength of statutory language, in the fram-
ing of which the draftsmen had not the remotest trace of the
present question in their minds. The legislature should face

180 —

squarely the question whether the third party who happens to
be so unfortunate as to get tangled up with a compensable injury
should, so to speak, individually subsidize the compensation sys-
tem by bearing alone a burden which normally he could shift to
the employer.”

While the opinions of other jurisdictions must be read with
caution on this issue because of different statutes and concepts
of recovery in negligence cases, we have found direction in the
approach taken by the Pennsylvania Supreme Court. That court
has allowed contribution from the employer up to the amount
of the workers’ compensation benefits. Maio v. Fahs, 339 Pa. 180,
14 A. 2d 105 (1940); Brown v. Dickey, 397 Pa. 454, 155 A. 2d
836 (1959). See, also, Stark v. Posh Construction Co. 192 Pa.
Super. 409, 162 A. 2d 9 (1960). This approach allows the third
party to obtain limited contribution, but substantially preserves
the employer’s interest in not paying more than workers’ com-
pensation liability. While this approach may not allow full contri-
bution recovery to the third party in all cases, it is the solution
we consider most consistent with fairness and the various statu-
tory schemes before us. If further reform is to be accomplished,
it must be effected by legislative changes in workers’-compensa-
tion-third-party law.

For the reasons expressed above, the judgment is reversed and
the case is remanded with instructions to grant contribution
against Hutchinson in an amount proportional to its percentage
of negligence, but not to exceed its total workers’ compensation
liability to plaintiff.

Affirmed in part, reversed in part and remanded with instruc-
tions.

t

re 181

IN RE ARBITRATION BETWEEN WALLACE R.
HENNEN, AS TRUSTEE FOR THE HEIRS OF GENE
HENNEN, AND ANOTHER AND ST. PAUL
MERCURY INSURANCE COMPANY.

250 N. W. 2d 840.

February 4, 1977 — No. 46757.

Meagher, Geer, Markham, Anderson, Adamson, Flaskamp &
Brennan, O. C. Adamson II, R. D. Blanchard, and John Hally
Riley, for appellant.

Schermer, Schwappach, Borkon & Ramstead and Irvin E.
Schermer, for respondents.

Heard before Kelly, Yetka, and Scott, JJ., and considered and
decided by the court en banc.

132 es

Scort, JUSTICE.

This is an appeal in an insurance arbitration case. Separate
arbitration tribunals were formed to settle the claims of Wallace
R. Hennen and Albert Breeggemann against St. Paul Mercury
Insurance Company (Mercury). Mercury disputed the decision
of the Breeggemann tribunal and moved in district court for an
order vacating its decision. Breeggemann moved to confirm the
arbitrators’ decision. Following consolidation, the district court
denied the motion to vacate, confirmed the tribunal’s decision,
and ordered judgment for Breeggemann. Mercury appeals from
that judgment. We affirm.

On March 10, 1974, a car driven by Gene Hennen with Annella
Breeggemann as a passenger collided head-on with another car
driven by Gary Leegaard. Both drivers were killed, while Annella
suffered severe injuries. It is generally accepted that Leegaard
was the negligent party.

Wallace Hennen, trustee for the heirs of Gene, and Albert
Breeggemann, individually and as father and natural guardian
of Annella, both initially sought recovery from Utah Insurance
Company, which insured the Leegaard vehicle. Utah denied
coverage, however, on the basis of a “household exclusion” in
its policy. Mercury conceded that this refusal established a prima
facie case for uninsured motorist benefits, but denied that the
refusal was conclusive. Mercury further disputed whether the
stacking of uninsured motorist benefits was appropriate for
Breeggemann, though it appeared to concede that such stacking
was available in the Hennen matter. The three Hennen policies
covered four vehicles in all.

Two separate arbitration tribunals were convened, composed
of the same three arbitrators, one for the Hennen case and the
other for the Breeggemann case. The Hennen panel awarded
damages of $29,000 to Wallace Hennen for the death of his son;

1Since there were no findings of fact made by either the arbitration

tribunals or the district court, the facts as stated herein are drawn from
the parties’ briefs.

ee 183

this award was not disputed. Three issues were before the
Breeggemdnn tribunal: (1) Did Utah’s denial of coverage make
Mercury’s uninsured motorist coverage available to Breeg-
gemann? (2) Was stacking of the Hennen policies appropriate
in the Breeggemann case? (3) What were Breeggemann’s dam-
ages? Mercury filed a brief with the arbitrators on the second
issue, i. e., the propriety of stacking the insurance policies, and
Breeggemann responded. This issue was also argued orally be-
fore the arbitrators.

The Breeggemann tribunal decided the issues as follows: (1)
Mercury’s uninsured motorist coverage was available to Breeg- ¢
gemann; (2) the Hennen policies were to be stacked to make
$40,000 available for Breeggemann’s claims; and (3) Breeg-
gemann’s damages exceeded $40,000. The tribunal awarded
Breeggemann the full $40,000.

Mercury disagreed with the tribunal’s decision on the stacking
issue and sought to have the award vacated in district court on
the ground that the tribunal had exceeded its authority. The dis-
trict court denied the motion to vacate and stated in a brief
memorandum accompanying its order that even if the arbitrators
had erred as a matter of law, this was not a sufficient basis for
setting aside the award.

On appeal, Mercury contends that the Breeggemann tribunal
exceeded its authority by making stacking available to Breeg-
gemann, and seeks reversal of the district court on this basis.

The following legal issues are presented:

(1) Was the trial court correct in ruling that the stacking
issue was properly before the Breeggemann tribunal?

(2) Was the trial court correct in ruling that the Breeg-
gemann tribunal did not exceed its authority in deciding Breeg-
gemann was entitled to stacking of the Hennen policies?

(8) Was the trial court correct in ruling that the award was
not so excessive as to constitute a fraud on the parties in this
case?

I In Minnesota, written agreements to arbitrate are inter-

184 EE

preted with reference to the Uniform Arbitration Act, Minn. St.
c. 572. Component Systems v. Murray Enterprises of Minn. 300
Minn. 21, 217 N. W. 2d 514 (1974). In this case each of the Hen-
nen policies contained such a written agreement, phrased as fol-
lows:

“Tf any person making claim hereunder and the Company do
not agree that such person is legally entitled to recover damages
from the owner or operator of an uninsuréd automobile because
of bodily injury to the Insured, or do not agree as to the amount
of payment which may be owing under this Part, then, upon
written demand of either, the matter or matters upon which such
person and the Company do not agree shall be settled by arbitra-
tion in accordance with the rules of the American Arbitration
Association * * *,”2

Mercury contends that this language allows only two issues to
be placed before arbitrators. First, is the occupant insured
“legally entitled to recover damages from the owner or operator
of an uninsured automobile?” Second, what is “the amount of
payment which may be owing?” From this Mercury concludes
that the tribunal was not empowered to decide Annella Breeg-
gemann’s “status as an insured” under all of the Hennen poli-
cies.? Breeggemann contests both steps of this analysis, arguing
that the arbitration clause involved in this case fully extends to
deciding whether Annella Breeggemann was covered by the Hen-
nen policies.

In our recent decision in Dunshee v. State Farm Mut. Auto.
Ins. Co. 308 Minn. 473, 228 N. W. 2d 567 (1975), this court estab-
lished the following mode of analysis in cases such as this:

«* * * This question of the intended scope of the arbitra-

2See Milwaukee Mut. Ins. Co. v. Currier, 310 Minn. 81, 245 N. W.
2d 248 (1976) for interpretation of a similar arbitration clause.

3 There was no question that Annella jwas covered by the specific
policy referring to the accident vehicle. Mercury objects to her re-
covery under Albert Hennen’s other policies, which were written for
other vehicles.

| 135

tion clause regarding a so-called ‘coverage’ issue is one of first
impression in this state. It must be decided by resort to the per-
tinent provisions of the Uniform Arbitration Act which mani-
fests this state’s policy favoring arbitration for the informal,
speedy, and inexpensive resolution of present and future disputes
arising between contracting parties where the contract contains
an arbitration clause.” 303 Minn. 477, 228 N. W. 2d 570.
Dunshee involved an arbitration clause virtually identical in rele-
vant respects to that in the present case. The dispute in Dunshee
was whether the claimant had been struck by a “hit-and-run
driver” as defined in the policy. State Farm refused arbitration
on this question, but this court reversed the district court which
had upheld the refusal. We established the following criterion
for deciding whether an issue is a proper one for arbitration:

“Determining that the scope of the arbitration clause is rea-
sonably debatable under standards previously adopted by deci-
sions of this court construing the Uniform Arbitration Act, we
reverse and order arbitration of the controversy.” 303 Minn. 474,
228 N. W. 2d 568.

See, also, Atcas v. Credit Clearing Corp. of America, 292 Minn.
334, 197 N. W. 2d 448 (1972); Har-Mar, Inc. v. Thorsen & Thor-
shov, Inc. 300 Minn. 149, 218 N. W. 2d 751 (1974).

The question in the present case then becomes whether it is
reasonably debatable that the arbitration clause herein extends
to determining Breeggemann’s right to recover under each of
the Hennen policies.

The Hennen policies defined “insured” in part as follows:

“(a) the named Insured and any relative;

“(b) any other person while occupying an insured auto-
mobile.”
The term “insured automobile” is defined in part as—

“(a) an automobile described in the Policy for which a spe-
cific premium charge indicates that coverage is afforded.”

186 ee

Mercury argues that because only one of the Hennen policies
charged an uninsured motorist premium for the accident vehicle,
Breeggemann can recover only under that policy. Breeggemann
responds that this interpretation is at least questionable, and as-
serts that doubts should be resolved in favor of extending, rather
than limiting, coverage.

This issue of interpretation appears to be one on which reason-
able minds might differ. As Breeggemann points out, the defini-
tion of “insured” in the Hennen policies does not distinguish be-
tween named insureds and occupant insureds. The phrase
“occupying an insured automobile” adds little by way of qualifi-
cation, since coverage would hardly be extended to any person
riding in any car being driven by the named insured, whether the
car was insured or not. This phrase can reasonably be read to
extend the same coverage to the occupant insured as to the named
insured, providing the named insured is driving an insured auto-
mobile, as was the case here.

The second qualifier under “insured automobile” is also
subject to interpretation. Since these definitions refer only to
uninsured motorist coverage, this qualifier may be intended only
to limit uninsured motorist coverage to those vehicles for which
premiums for this purpose were paid. The policy itself states
near the top: “Insurance Afforded Only For Coverages Indi-
cated by Specific Premium Charges.” In this case premium
charges were paid for uninsured motorist coverage on all the
Hennen vehicles, thus allowing stacking in favor of Gene Hen-
nen. In view of Minnesota’s strong policy of extending coverage
rather than allowing coverage to be restricted by confusing or
ambiguous language, stacking uninsured motorist coverage in
Breeggemann’s favor is a debatably arbitrable issue under the
clause at issue herein. See, Van Tassel v. Horace Mann Mut. Ins.
Co. 296 Minn. 181, 207 N. W. 2d 848 (1978); Pleitgen v. Farmers
Ins. Exchange, 296 Minn. 191, 207 N. W. 2d 585 (1978);
Integrity Mut. Ins. Co. v. State Auto. and Cas. Underwriters Ins.
Co. 8307 Minn. 178, 239 N. W. 2d 445 (1976).

rs 187

I It the stacking issue was properly before the Breeggemann
tribunal, its decision can be challenged only as provided in Minn.
St. 572.19, subd. 1:

“Upon application of a party, the court shall vacate an award
where:

“(1) The award was procured by corruption, fraud or other
undue means;

“(2) There was evident partiality by an arbitrator appointed
as a neutral or corruption in any of the arbitrators or misconduct
prejudicing the rights of any party;

“(3) The arbitrators exceeded their powers;

“(4) The arbitrators refused to postpone the hearing upon
sufficient cause being shown therefor or refused to hear evidence
material to the controversy or otherwise so conducted the hear-
ing, contrary to the provisions of section 572.12, as to prejudice
substantially the rights of a party; or

“(5) There was no arbitration agreement and the issue was
not adversely determined in proceedings under section 572.09
and the party did not participate in the arbitration hearing with-
out raising the objection;

“But the fact that the relief was such that it could not or would
not be granted by a court of law or equity is not ground for vacat-
ing or refusing to confirm the award.”

Mercury argues that the Breeggemann arbitrators exceeded
their authority in finding Annella Breeggemann an “insured”
under all the Hennen policies, in violation of clause (3) above.
First, Mercury raises the “status as an insured” issue, arguing
that the arbitration clause did not extend to determination of
this coverage question. This argument has been discussed above,
where it was concluded that the clause debatably extended to the
stacking question. Second, Mercury contends that the tribunal
ignored the “plain wording” of the policy definitions, thus reach-
ing an incorrect interpretation. Breeggemann responds that the
tribunal’s interpretation is binding, even if erroneous.

138 es

Had Breeggemann claimed coverage as an insured in a com-
mon-law action, Mercury could have required submission of the
matter to arbitration under the arbitration clauses contained
in the policies. This we would have agreed with, in manifesting
this state’s policy favoring arbitration. We would not refuse to
ultimately review the findings of the arbitration tribunal as pro-
vided by law in furtherance of that policy. The court, in stating
that even if the arbitrators had erred as a matter of law this
would not be a sufficient basis for setting aside the award, was
construing this function too narrowly. We therefore hold that the
coverage question was properly before the arbitration tribunal,
and the award should not be vacated under § 572.19, subd. 1, as
an excess of authority.

I Mercury argues that the award of the Breeggemann
tribunal was so excessive that it constituted a fraud on the par-
ties. This argument does not merit lengthy discussion. First, the
tribunal had only two award options available to it since it is un-
disputed that Annella Breeggemann’s damages exceeded $40,000
recovery under one policy for $10,000, or recovery under all
policies for $40,000. The decision of the tribunal to adopt the lat-
ter option, where no evidence is claimed of partiality or corrup-
tion, cannot be said to establish fraud for the purposes of
§ 572.19, subd. 1(1). It is purely conclusionary to argue, as
Mercury does in its reply brief, that the fraud consists in the fact
that Breeggemann has received “four times the coverage to
which they were actually entitled.’ Four premiums were paid
to Mercury by Wallace R. Hennen, whose car Annella Breeg-
gemann occupied when her injuries were sustained. The arbi-
trators’ decision, while not beyond a reasonable difference of
opinion, was in no way fraudulent, nor even inequitable, under
the facts of this case. No grounds exist for vacating the award
for fraud, constructive or otherwise.

Affirmed.

Mr. JUSTICE OTIS took no part in the consideration or decision
of this case.

WILLIAM YKOVCHICK v. PUBLIC SCHOOLS OF
MINNEAPOLIS AND OTHERS.

251 N, W. 2d 626.

February 10, 1977—No. 46666.

Michael Fargione, Legal Aid Society of Minneapolis, for rela-
tor.

Lindquist & Vennum and Jerrold F. Bergfalk, for respondent
Minneapolis Special School District No. 1.

Kingsley D. Holman, for respondent Bloomington Public
Schools.

Warren Spannaus, Attorney General, and Frank Levin, Spe-
cial Assistant Attorney General, for respondent Department of
Employment Services.

Topp, JUSTICE.

William Ykovchick placed his name on an “on call” list of sub-
stitute teachers in the Bloomington, Minneapolis, and Richfield
school districts. He performed such services for each district in

140

varying amounts of time on a day-to-day basis during the 1973-
1974 school year. He indicated his availability for such services
during the 1974-1975 school year but nevertheless sought un-
employment benefits for the summer of 1974. His claim was
denied on the basis of Minn. St. 1974, § 268.08, subd. 5, which
precludes such benefits for certain enumerated employees of a
school district during the summer months. We affirm.

Ykovchick has been employed for several years as a substitute
teacher for each of the defendant school districts. There was no
formal contract of employment. Instead, Ykovchick would re-
ceive a yearly letter from each school district inquiring as to
whether he wished to be a part of the districts’ “on call” list of
substitute teachers. Ykovchick would communicate his desire
and assent to be placed on the “on call” list by submitting an ap-
plication form furnished by the school district. He was on the
list of available substitute teachers and performed such services
for each school district during the 1978-1974 school year. In addi-
tion, he submitted his application to be included on the list for
the 1974-1975 school year in each district and performed substi-
tute teaching services for each district during that year.

On June 2, 1974, Ykovchick filed a claim for unemployment
compensation, asking to be paid benefits earned during his em-
ployment as a substitute teacher. After his request was denied
by the claims deputy, Ykovchick appealed to the appeal tribunal.
An individual hearing was held concerning his claim with the
Bloomington and Richfield school districts. His appeal with the
Minneapolis district was considered in a group hearing involving
other teachers’ claims. In each instance, the decision of the claims
deputy denying Ykovchick benefits pursuant to § 268.08, subd.
5, was affirmed by the appeal tribunal. Upon appeal, the com-
missioner of the Department of Employment Services affirmed
the denial of benefits. The matter is before this court on writ of
certiorari.

The sole issue is whether Ykovchick, a substitute teacher em-
ployed on an “on call” basis, is eligible to receive unemployment

a 141

compensation benefits during the summer months, when teach-
ing services are not normally performed, pursuant to the provi-
sions of Minn. St. 1974, § 268.08, subd. 5, which provides:

“Effective January 1, 1974, benefits based on service in em-
ployment defined in section 268.04, subdivision 12, clauses (7),
(8), and (9), shall be payable in the same amount, on the same
terms and subject to the same conditions as compensation pay-
able on the basis of other service subject to this law except that,
* * * (6) benefits based on wage credits earned in the employ-
ment of a public school, shall not be paid to an individual during
any period between two successive school years when the activity
in which the wage credits were earned is not normally per-
formed. This provision shall not apply to any individual who,
prior to the end of a school year, has voluntarily left or has been
indefinitely separated from such employment. For the purposes
of this clause, school year means that period established by a
school board in accordance with Minnesota Statutes 1971, Sec-
tion 126.12.”

HH Initially, we hold that Ykovchick is an individual seeking
to establish eligibility under the statute. It is the rule in Min-
nesota that while the employer has the burden of proving the ap-
plicability of a disqualification provision (Johnson v. Ford Motor
Co. 289 Minn. 388, 184 N. W. 2d 786 [1971]; Kantor v. Honey-
well, Inc, 286 Minn. 29, 175 N. W. 2d 188 [1970]), the claimant
has the burden of proving eligibility under the unemployment
compensation statutes. Kleinwachter v. Dept. of Employment
Services, 8305 Minn. 568, 234 N. W. 2d 822 (1975); Adelsman v.
Northwest Airlines, Inc. 267 Minn. 116, 125 N. W. 2d 444
(1963); see, generally, 81 C. J. S., Social Security and Public
Welfare, § 219. Thus, in the present case, Ykovchick has the
burden of proving his eligibility under § 268.08, subd. 5.

WH Ykovehick contends that the evidence establishes that he
has been indefinitely separated from his employment within the
meaning of the statute. He stresses the fact that after he had per-

142 Es

formed one day’s work on an “on call” basis, neither he nor his
employer could determine when his services would again be re-
quired. Therefore, Ykovchick argues, he is indefinitely separated
from his employment, qualifying him for payment of benefits
during the summer recess. We decline to accept such an inter-
pretation of the applicable statutory language since it ignores
the facts of the situation. The position Ykovchick sought was
that of a substitute teacher which by its very nature involves
sporadic employment. The California Court of Appeal in con-
sidering the position of an intermittent employee in Smith v. Un-
employment Ins. Appeals Bd. 52 Cal. App. 8d 405, 409, 125 Cal.
Rptr. 35, 38 (1975), reflects the views of this court when it said:

“In denying coverage, the appeals board pointed out that the
layoff procedure is inappropriate to the situation of the inter-
mittent employee. The latter knowingly accepts a position involv-
ing sporadic work on call from the employer; when, through lack
of need or lack of budget, the work calls drop below past or ac-
customed weekly levels, no layoff in the sense of the Civil Service
Act occurs, because the employee is never separated from the
state civil service. Rather, he retains precisely the civil service
position he originally accepted, remaining available for whatever
sporadic work his employer’s needs require. The present claim-
ants had never received notice of layoff.”

The record clearly establishes that Ykovchick was employed
by the respective school districts as a substitute teacher both at
the end of the 1973-1974 school year and the beginning of the
1974-1975 school year. Being so employed, he clearly is within
the statutory exclusion specified in § 268.08, subd. 5.

We find no merit in Ykovchick’s reliance on several Minne-
sota cases which examine an individual’s status under the teacher
tenure statutes. We are not considering a claim of tenure in this
case, but rather the status of an individual employed as a sub-
stitute teacher in relation to the unemployment compensation
statutes. Ykovchick’s employment remained unchanged during

143

the specific school years in question and thus he is precluded

from receiving benefits during the summer months under the
provisions of our statute.
Affirmed.

Mr. Cuier JusTICE SHERAN took no part in the consideration
or decision of this case.

BAACT CORP. v. EXECUTIVE AERO, INC.*

251 N. W. 2d 107.

February 10, 1977—No, 46624.

Meagher, Geer, Markham, Anderson, Adamson, Flaskamp &
Brennan, O. C. Adamson II, R. D. Blanchard, John Hally Riley,

Thomson, Lovett, Wahlfors & Moran, and Thomas G. Lovett, Jr.,
‘for appellant.

*Certiorari denied, 434 U. S. 825, 98S. Ct. 74, 54 L. ed. 2d 83 (1977).

144 es

Richards, Montgomery, Cobb & Bassford, Nathan A. Cobb, and
Jerome C. Briggs, for respondent.

ee

YETKA, JUSTICE.

BAACT CORP. commenced this action against Executive
Aero, Inc., seeking indemnity or contribution. The trial court
ordered judgment for BAACT in the sum of $72,155.25. Execu-
tive Aero appeals from the judgment and the denial of its post-
trial motion. We affirm.

The following issues are presented by this appeal:

(1) Does Wisconsin or Minnesota law govern the issue of
contribution?

(2) Does a purchaser of assets in bankruptcy succeed to a
bankrupt’s right of contribution?

On March 21, 1965, an aircraft owned by Tayam, a partner-
ship, crashed in Wisconsin. Seven passengers were killed and
five were injured. Tayam sued the manufacturer of the plane,
Mooney Aircraft, Inc. (Mooney), and the retailer, Executive
Aero, Inc. A second suit on behalf of the passengers was brought
against the same defendants.

Both cases were venued in Hennepin County and consolidated
for trial. The issue of negligence was submitted to the jury under
the Wisconsin comparative negligence statute. The jury found
Executive Aero 55 percent and Mooney 45 percent causally negli-
gent, Damages totaled $160,345—$131,845 for various personal
injuries and $28,500 for damage to Tayam’s aircraft. Judgment
was entered against both defendants with each being jointly and
severally liable.t To secure the collection of their judgment
against Mooney the successful plaintiffs brought an action on
the judgment in Texas, where Mooney owned real estate. They
secured a Texas judgment in the sum of $160,345 on May 10,
1968.

“1 Executive Aero, Inc., appealed to this court in Tayam v. Executive
Aero, Inc. 283 Minn. 48, 166 N. W. 2d 584 (1969). The judgment against
it was affirmed. Mooney did not appeal the judgment against it.

— 145

On February 17, 1969, Mooney filed a petition for voluntary
bankruptcy and the bankruptcy court authorized the receiver
to sell Mooney’s assets to American Electronic Laboratories, Inc.
(AEL). AEL formed a new corporation, BAACT CORP.,? to
receive the assets of the bankrupt and to continue its business
operations. A bill of sale was issued to BAACT on March 25,
1969.

On May 10, 1969, BAACT paid $144,310.50 toward the Texas
judgment entered against Mooney with checks drawn on AEL.
Executive Aero’s insurer, Ohio Casualty Insurance Company,
satisfied the balance of the judgment.

In 1970, BAACT and AEL brought this action in Hennepin
County District Court to compel contribution or indemnity from
Executive Aero. The court required BAACT and AEL to de-
cide which of them, if either, owned Mooney’s alleged cause of
action for contribution. The parties chose BAACT. The court
ordered a bifurcated trial of the case to sever the issues as to the
plaintiff’s claim for contribution from the issues as to the plain-
tiff’s claim for indemnity and so as to provide for a hearing to
take up the legal questions as to contribution. The other issues
were to be decided in separate trial by jury at a later date. In ad-
dition, the court ordered the parties to prepare a stipulated set
of facts and to brief three issues:

(1) Has plaintiff acquired, by assignment or otherwise, a
viable cause of action for contribution against defendant?

(2) Are the contribution rights governed by the law of
‘Wisconsin or the law of Minnesota?

(3) Are the determinations made in the jury’s verdict in the
original actions res judicata?

The court held that BAACT was entitled to contribution as
a matter of law and made the following conclusions of law:

2 This new corporation twice changed its name. Initially it was called
Mooney Aircraft Corporation. Its name was subsequently changed to
Aerostar Aircraft Corporation of Texas and finally to BAACT CORP.

146 : a

“CONCLUSIONS OF LAW

“1, Plaintiff BAACT CORP. has a valid cause of action for
contribution.

“2, Wisconsin Law governs the issue of contribution between
the parties.

“83. The following facts found by the jury in [the original
actions filed by the injured passengers and the aircraft owner
against Mooney and Executive Aero] are res judicata:

a. Mooney Aircraft, Inc. and Executive Aero, Inc. were joint

tort-feasors. .

b. Mooney Aircraft, Inc. was negligent, its negligence was
a direct cause of plaintiffs’ injuries and damages, and the
percentage of negligence attributable to Mooney Aircraft,
Inc. arising out of the accident of March 25, 1965, was
45 per cent.

ce. Executive Aero, Inc. was negligent, its negligence was a
direct cause of plaintiffs’ injuries and damages, and the
percentage of negligence attributable to Executive Aero,
Inc. arising out of the accident of March 25, 1965, was 55
per cent. ;

“4, Plaintiff BAACT CORP. has succeeded to the rights of

contribution of Mooney Aircraft, Inc.

“5. Plaintiff BAACT CORP. is entitled to contribution from
Executive Aero, Inc. pursuant to the laws of the State of
Wisconsin.

“6. Under the laws of the State of Wisconsin, plaintiff’s pay-
ment rendered complete its cause of action for contribution
against the defendant abovenamed in the amount of $72,155.25.”
The trial court applied Wisconsin law to the issue of contribu-
tion. Appellant contends it committed error in so doing. How-
ever, since in the original Tayam case Wisconsin law was applied
on the issue of liability, that determination became the law of
the case. The first trial determined that Executive Aero was neg-
ligent. In affirming that determination on appeal, this court held
there was adequate independent evidence of negligence on the

Le 147

part of Executive Aero. Thus, the issue of passive versus active
negligence and the filing of cross claims need not be discussed.
‘The jury in the original action was given sufficient evidence re-
garding the issues of negligence and apportionment of that neg-
ligence between the defendants which, when properly deter-
mined by the jury, foreclosed the necessity for a redetermination
of these issues. Thus, if it was the proper party to bring this ac-
tion, the plaintiff is entitled to contribution from Executive
Aero.

We hold that BAACT established it holds a chose in action
which is prima facie valid; that the chose in action was duly as-
signed to it; and that the chain of title dates back to the judicial
sale of the bankruptcy court. Executive Aero is estopped from
collaterally attacking the integrity of that judicial order and de-
cree. A decree of a bankruptcy court which confirms a sale by
the trustee is not subject to collateral attack. See, 9 Am. Jur. 2d
Bankruptcy, § 1217; 8A C. J. S. Bankruptcy, § 325. A con-
firmed sale in bankruptcy confers full legal and equitable title
upon the purchaser. 4A Collier, Bankruptcy § 70.98[18].

The trial court is affirmed in all respects.

|
STATE v. PREDRAG P. FILIPOVIC. ‘

251 N. W. 2d 110.

February 10, 1977—No. 46631.

Warren Spannaus, Attorney General, William B. Randall,
County Attorney, and Steven C. DeCoster, Assistant County At-
torney, for plaintiff.

Richard H. Knutson, for defendant.

Heard before Todd, Yetka, and Winton, JJ., and considered
and decided by the court en bance.

CRANE WINTON, JUSTICE.*

This case comes here upon a certified report of the trial court
made pursuant to Rules of Criminal Procedure, Rule 29.02, subd.
4, posing the question whether consent by a complainant who
is at least 13 but less than 16 years of age is a defense to the
charge of criminal sexual conduct in the fourth degree as defined
by Minn. St. 609.845(b). This court has concluded for the rea-
sons hereafter given that answering the question on the present
stance of the record would be inappropriate. The case, therefore,
is remanded to the trial court without an answer to the question
certified.

As stated, the defendant, aged 35 years, has been charged by
complaint with the offense of criminal sexual conduct in the
fourth degree with a 15-year-old girl. In due course he entered
a not guilty plea and the case was set for trial February 10, 1976.
During a preliminary conference in chambers, defendant’s coun-
sel declared his intention to make a motion for dismissal of the
case on the grounds of ambiguity in the statutory language de-

*Acting as Justice of the Supreme Court by appointment pursuant
to Minn. Const. art. 6, § 2, and Minn. St. 2.724, subd. 2.

be 149

fining the elements of the crime and the defenses thereto. More
specifically, he claimed that it was impossible to tell whether one
accused of the offense could avail himself of the defense of con-
sent.2 The judge responded that he would not entertain the mo-
tion unless satisfied that testimony by the defendant would sup-
port the defense of consent. He then ordered testimony to be
taken from the defendant under full constitutional safeguards
against self-incrimination solely for the purpose of determining
whether there was evidence to support a jury finding that the
girl consented to the act charged. After the defendant’s testi-

1 Minn. St. 1975 Supp. § 609.345 provides: “A person is guilty of crimi-
nal sexual conduct in the fourth degree and may be sentenced to im-
prisonment for not more than five years, if he engages in sexual con-
tact with another person and if any of the following circumstances
exists:

“(a) The complainant is under 13 years of age and the actor is no
less than 36 months older than the complainant. Neither mistake as to
the complainant’s age or consent to the act by the complainant is a de-
fense; or

“(b) The complainant is at least 13 but less than 16 years of age and
the actor is more than 48 months older than the complainant or in a
position of authority over the complainant and uses this authority to
coerce the complainant to submit. In any such case, it shall be an af-
firmative defense which must be proved by a preponderance of the evi-
dence that the actor reasonably believes the complainant to be 16 years
of age or older; or

“(c) The actor uses force or coercion to accomplish the sexual con-
tact; or

“(d) The actor knows or has reason to know that the complainant
is mentally defective, mentally incapacitated, or physically helpless.”

2The case comes to this court without any transcript of the proceed-
ings either in chambers or in court when the defendant’s testimony was
taken as hereafter described. Our summary of the facts is derived from
the trial judge’s report.

3 The police interviewed both the girl and the defendant, and copies
of the resulting reports are included in the appendix to the state’s brief.
When interviewed, the girl maintained that she resisted the defendant’s
advances. For his part the defendant stated that the girl was the ag-
gressor and denied either kissing or touching her.

FT

150 es

mony was taken under oath, the trial judge found that the evi-
dence was sufficient to raise the issue of consent “on a prima
facie basis.”

In his report the trial judge noted that Minn. St. 609.845 (b)
provides that mistake in age is an affirmative defense but is
silent about consent. Why the case was reported and the question
certified is best stated by the trial judge in his memorandum:

“Following the testimony of the defendant, the Court enter-
tained the motion of the defendant to dismiss the case, and it is

. pursuant to this motion to dismiss that the Court is certifying
to the Supreme Court the question of law set ‘forth below relative
to the issue of consent, because the Court feels that this question
is important and doubtful and should be determined prior to the
trial of the captioned action. If consent is available to the de-
fendant as a defense, it may well be that the prosecution will join
in the dismissal motion. If it is not available as a defense, the
matter may well be disposed of without the necessity of a trial.”

This court thus is presented with a request to answer a question
of law before commencement of a trial that may not be held upon
the basis of testimony that may never be given even if the case
proceeds to trial. The question is whether it is appropriate for
the court to answer the question certified under such circum-
stances. .

Rules of Criminal Procedure, Rule 29.02, subd. 4, governs the
certification of proceedings in felony and gross misdemeanor
cases and provides in so far as material here:

“If, upon the trial of any person convicted in any district
court, or if, upon any motion to dismiss a complaint or indict-
ment, or upon any motion relating to the indictment or com-
plaint, any question of law shall arise which in the opinion of
the judge is so important or doubtful as to require a decision of
the Supreme Court, he shall, if the defendant shall request or
consent thereto, report the case, so far as may be necessary to
present the question of law, and certify the report to the Supreme

a 151

Court, whereupon all proceedings in the case shall be stayed until
the decision of the Supreme Court.”

Minn. St. 682.10, superseded by Rule 29.02, subd. 4, had made
provision for certification in criminal proceedings.* Hence, ref-
erence can appropriately be made to the case law concerning ap-
plication of the statute for guidance in defining the application
of the rule.

Although certification is a proper means of presenting im-
portant or doubtful questions of law, State v. Dumas, 118 Minn.
TT, 186 N. W. 811 (1912), this court has imposed and enforced
limitations on its use.® The certification procedure should not
be used to present a hypothetical question or to secure an ad-
visory opinion. Nor should it be invoked until the record is suffi-
ciently developed to present a substantive issue. Thompson v.
State, 284 Minn. 274, 170 N. W. 2d 101 (1969); State v. Moller,
276 Minn. 185, 149 N. W. 2d 274 (1967).

As presented, the question certified here is one of law and, to
that extent, proper. Moreover, the fact that the trial court did
not rule on the question does not affect the propriety of the cer-
tification. State v. Reps, 302 Minn. 88, 223 N. W. 2d 780 (1974).
The conclusion, however, that in the present stage of the proceed-
ings the question is hypothetical seems inescapable. The defend-
ant has testified under oath but for a limited purpose and only

4 The portions of Minn, St. 632.10 which are parallel to the quoted part
of Rules of Criminal Procedure, Rule 29.02, subd. 4, state: “If upon the
trial of any person convicted in any district court, or if, upon any
demurrer or special plea to an indictment, or upon any motion upon
or relating thereto, any question of law shall arise which in the opinion
of the judge is so important or doubtful as to require the decision of the
supreme court, he shall, if the defendant shall request or consent there-
to, report the case, so far as may be necessary to present the question
of law arising therein, and certify the report to the supreme court, and
thereupon all proceedings in the cause shall be stayed until the decision
of the supreme court shall have been made.”

5 See, for example, State v. Bristol, 276 Minn. 158, 149 N. W. 2d 84
(1967).

152,

after being made fully secure in his constitutional privilege
against self-incrimination. Whether he would waive his im-
munity and testify at a trial on the merits is not known. Nor does
it seem by any means clear from the trial judge’s report that trial
of the case is certain were the question to be answered either af-
firmatively or negatively. Indeed it does not clearly appear that
an answer to the question would be dispositive of the pending
motion to dismiss the complaint. Hence, any opinion answering
the question would be purely advisory in nature at this juncture
in the proceedings and, therefore, inappropriate.

This court, therefore, concludes that in the present posture
of the case, the certified question should not be answered and
that the case should be remanded for such further proceedings
as are appropriate.

Remanded.

Mr. JUSTICE KNUTSON took no part in the consideration or
decision of this case.

Le
WILLIAM PETERS v. WATERS INSTRUMENTS, INC.
_ 251 N. W. 2d 114.

February 10, 1977—No. 46696.

es 153

Rider, Bennett, Egan, Johnson & Arundel, Lee T. Peterson,
and William J. George, for appellant.

Fredrikson, Byron, Colborn, Bisbee & Hansen and Jerome B.
Pederson, for respondent.

Heard before Rogosheske, Peterson, and MacLaughlin, JJ.,
and considered and decided by the court en banc.

PER CURIAM.

Plaintiff appeals from an order of the district court, and from
the judgment entered thereon, dismissing with prejudice his ac-
tion for damages arising out of his former employment by de-
fendant. Defendant’s motion to dismiss was brought on two
grounds: (1) Failure to prosecute, pursuant to Rule 41.02(1),
Rules of Civil Procedure; and (2) insufficiency of service of
process, pursuant to Rule 12.02(4), Rules of Civil Procedure.
The trial court’s original order of dismissal referred only to a
dismissal “for lack of prosecution.” A second order denying
plaintiff's motion to vacate the first order of dismissal referred
to “lack of prosecution and insufficient service of process.” No
findings of fact, conclusions of law, or memorandum accom-
panied the district court’s orders. For the reasons stated herein,
we reverse.

Plaintiff, William Peters, an employee of defendant, Waters
Instruments, Inc.,1 was appointed eastern regional marketing
manager for defendant’s air conveying division in April 1962,
pursuant to a 1-year, letter agreement and separate sales com-
mission agreement. In May 1966, a disagreement developed over
Peters’ commissions and, as a result, Peters wrote a letter to de-
fendant’s sales manager resigning effective June 15, 1966. Sub-
sequently, there were negotiations concerning terminal pay, com-
missions, and expenses, but Peters refused to accept the amount.
offered by defendant.

Thereafter, in 1968, Peters retained attorney William G. Dres-

1 At the time of plaintiff’s employment, defendant was known as Flo-
Tronics, Inc. It is now known as Waters Instruments, Inc.

fT

154 ee

sel to bring suit against defendant. On May 17, 1968, Dressel
wrote to the Hennepin County Sheriff requesting service of the
summons and complaint upon “one of the defendant’s officers.”
The parties concede that on May 23, 1968, a deputy sheriff served
a copy of the summons and complaint upon Sylvia Weerts, em-
ployed by defendant as the supervisor of bookkeepers in its ac-
counting department, and prepared a sheriff’s return of service
which was attached to the summons and complaint.

The essence of the complaint was that Peters had not been paid
all of the commissions and expenses to which he was entitled.
Defendant answered the complaint, and commenced discovery
proceedings by taking Peters’ deposition. During the deposition
Peters stated that he had to examine certain records of defend-
ant to determine the total dollar value of what he was owed, and
Peters agreed to furnish defendant, through Peters’ attorney,
with information helpful in ascertaining the claimed damages.

Thereafter, in September 1968, attorney Dressel served and
filed a note of issue. The file came up for review by defendant’s
attorney in June 1969. He sent a letter to Dressel indicating de-
fendant’s willingness to make an offer of settlement and suggest-
ing that the attorneys meet to discuss settlement within the week.
Defendant’s attorney never received either a written or a verbal
response to his letter.

In November 1969 the assets of the air conveying division of
defendant were sold to a Texas corporation and the business rec-
ords of the company were transferred to Houston.

From the time of defendant’s settlement offer in June 1969
until September 1975, there was no communication between the
parties or their attorneys. Peters was a resident of Canada dur-
ing this period and alleges that when he telephoned Dressel and
left messages he often received no response. On other occasions
when Peters was able to reach Dressel, he was told that the case
was on the court calendar, but the calendar was crowded and it
would be “quite some time” before the matter came to trial. On
still other occasions, Dressel told Peters that he had heard noth-

— 155

ing yet about trial but “would get into the file.” Peters further
alleges that he was never informed by Dressel that defendant
had made an offer of settlement.

In June 1975 Dressel finally told Peters that he was heavily
involved in other matters and would not be able to handle the
ease. Dressel withdrew as Peters’ attorney on August 25, 1975.
In September 1975 defendant’s counsel was informed that
Peters had hired a new lawyer, the counsel appearing for him
on this appeal.

In January 1976 defendant’s motion in district court to dis-
miss the action was granted. This appeal follows a denial of
plaintiff’s motion to vacate the order of dismissal and reinstate
the action.

1. Rule 41.02(1), Rules of Civil Procedure, provides as fol-
lows:

“The court may on its own motion, or upon motion of a party,
and upon such notice as it may prescribe, dismiss an action or
claim for failure to prosecute or to comply with these rules or.
any order of the court.”

We have long recognized that public policy requires reasonable
diligence in bringing litigation to a close and that parties should
not be permitted to drag suits on for unreasonable periods of
time since witnesses die or disappear and facts fade from
memory. Wheeler v. Whitney, 156 Minn. 362, 194 N. W. 777
(1928). A trial court has discretion to dismiss a suit where the
plaintiff’s failure to exercise reasonable diligence is wholly unex-
cused and both the nature of the claim and the situation of the
parties calls for the exercise of such diligence. General Minnesota
Utilities Co. v. Carlton County Co-op. Power Assn. 221 Minn.
510, 22 N. W. 2d 673 (1946).

However, an order of dismissal with prejudice must be justi-
fied by the facts and circumstances peculiar to each case. Kielsa.
v. St. John’s Lutheran Hospital Assn. 287 Minn. 187, 177 N. W.
2d 420 (1970). Since a dismissal with prejudice is a drastic form
of relief, it should be granted only in exceptional circumstances

156

where there are “considerations of wilfulness and contempt for
the authority of the court or the litigation process, in addition
to prejudice to the parties involved.” 2 Hetland and Adamson,
Minnesota Practice, p. 195 (1970).

We stated in Firoved v. General Motors Corp. 277 Minn. 278,
288, 152 N. W. 2d 364, 368 (1967) :

“An order of dismissal on procedural grounds runs counter
to the primary objective of the law to dispose of cases on the
merits. Since a dismissal with prejudice operates as an adjudica-
tion on the merits, it is the most punitive sanction which can be
imposed for noncompliance with the rules or order of the court
or for failure to prosecute. It should therefore be granted only
under exceptional circumstances, The primary factor to be con-
sidered in determining whether to grant a dismissal with or
without prejudice is the prejudicial effect of the order upon the
parties to the action * * *.”

Defendant contends that it will be prejudiced by the fact that
witnesses and records must be brought from distant locations,
thereby increasing the cost of its defense. The records were sent
to Texas in November 1969, only 18 months after this action was
commenced. It is difficult to see why there would be greater
hardship today for defendant to obtain the records pertaining to
Peters’ commission accounts than in 1969. Further, according
to the affidavit of Peters’ attorney, and confirmed at oral argu-
ment by counsel, the present locations of the essential witnesses
are known. The assertions by defendant that the determination
of their testimony would be expensive and time-consuming is not
sufficient prejudice to justify the dismissal particularly since
those witnesses who reside outside the state have done so since
the time this action was brought.

Defendant does not deny its indebtedness to Peters but only
contests the amount. Dismissal with prejudice bars Peters’ right
to payment of the amount owed and serves to unjustly enrich
defendant. Therefore, we have decided under the facts of this

es 157

case, including the neglect! of Peters’ counsel in the face of
Peters’ own diligence in attempting to move him to act, that
justice and equity require a reversal of the dismissal with preju-
dice.

2. Defendant also argues that it was improperly served with
process. No evidence of improper service was submitted to the
trial court prior to the time the action was dismissed and judg-
ment was entered for defendant, but certain affidavits were
presented by defendant at the time Peters brought his motion
to vacate the previous order to dismiss. In the face of an af-
fidavit of service by the sheriff, the burden is upon defendant
to show improper service. The trial court made no finding of fact
regarding the question of whether defendant had shown im-
proper service. We hold, based upon our review of the record,
that the burden has not been met.

Reversed.

ROBERT WEIDEMANN v. KEMPER INSURANCE
GROUP AND ANOTHER.

251 N. W. 2d 117.

February 18, 1977—No, 46447.

158 —

Van Eps, Gilmore & Chantry and George R. Benton, for rela-
tors. .

Weaver, Talle & Herrick and Charles R. Weaver, for respond-
ent.

Heard before Rogosheske, Peterson, and MacLaughlin, JJ.,
and considered and decided by the court en banc.

ROGOSHESKE, JUSTICE.

The employee, Robert Weidemann, was awarded temporary
total disability benefits for a work-related aggravation of a men-
tal disorder from the Kemper Insurance Group, his self-insured
employer.1 On certiorari, the employer contends that since the
employee’s claim petition was filed more than 2 years after the
employee’s first report of injury, the Workers’ Compensation
Commission erred in refusing to deny relief under Minn. St.
1971, § 176.151(1), which provides:

“The time within which the following acts shall be performed
shall be limited to the following periods, respectively:

“(1) Actions or proceedings by an injured employee to deter-
mine or recover compensation, two years after the employer has
made written report of the injury to the commission, but not to
exceed six years from the date of the accident.” (Italics sup-
plied.)

The employee argues that the 2-year period was tolled by the
employer’s payment on August 23, 1978, of long-term disability
and medical expenses under a policy of group health insurance.

1Kemper Insurance Group consists of a number of separate com-
panies including, but not limited to, Lumbermens Mutual Casualty Com-
pany and its subsidiary, American Motorists Insurance Company, which
were the group insurers in this case.

— 159

This payment was made in consideration of a written release
signed by the employee, who testified that the release was intend-
ed to absolve the employer and its group health insurer from
further liability under both the insurance policy and the Work-
ers’ Compensation Act. We hold that the commission, upon ade-
quately supported findings that the release was intended to in-
elude a release of the employee’s compensation claim, correctly
concluded that such payment constituted a “proceeding” which
tolled the running of the 2-year limitation.?

The employee was a claim adjustor for the Kemper Insurance
Group and its affiliates from April 1961 until June 10, 1972. He
had a long history of migraine headaches, beginning in 1965
when he suffered approximately two attacks per year. By 1972,
these headaches had become almost a weekly occurrence and the
symptoms had become much more severe. These symptoms were
described by the employee as a blurring of the vision, violent
head pain, and general numbness throughout the left side of his
body.

In early March 1972, he was hospitalized for one week, and
following discharge he remained at home until March 28, 1972.
Upon returning to work he requested the appropriate form for
filing a claim for workers’ compensation benefits, which he sub-
sequently completed and gave to his supervisor. This form and
the employer’s denial of liability were filed with the commission
on April 11, 1972. After the employee returned to work, he was
only assigned menial duties, which caused further depression.
By April 24 his condition had deteriorated to the point where

2 Because of deficiencies in proof, we find no significant merit in the
employee’s contentions that (1) the filing of the first injury report was
defective since it was not filed by the employer in compliance with
Minn. St. 1971, § 176.151(1); (2) the statute of limitations was alternative-
ly tolled under § 176.151(6) because of his mental incapacity; and (3) the
payment of wages by the employer after the reported injury was in-
tended to be in lieu of compensation and thus tolled the statutory
period. Krossen v. Oliver Iron Mining Co. 250 Minn. 430, 85 N. W. 2d 193
(1957).

160 a

he was no longer able to work. He was paid his regular salary
until June 10, 1972, when his employment was terminated. In
August 1972 he was again hospitalized for about one month, and
since that time he has remained on medication with little hope
of immediate recovery. Unrefuted medical testimony by the em-
ployee’s treating psychiatrist established that he was totally dis-
abled as a result of a mental disorder aggravated by his employ-
ment.

During his employment, he elected to be covered under the em-
ployer’s group insurance plan which provided hospitalization,
medical, and long-term disability benefits. A substantial portion
of the employee’s medical expenses was apparently paid by the
group insurer in 1972. During that same year the employee filed
a claim for disability benefits with the group insurer. In 1973
negotiations, participated in by representatives of the group in-
surer and Kemper Insurance Group, resulted in the execution by
the employee on August 23, 1978, of a written release of all past,
present, and future claims in consideration for the payment of
$5,800. On May 8, 1974, more than 2 years after the April 11,
1972, report and the employer’s denial of liability were filed, the
employee filed this claim petition for workers’ compensation
benefits.

We have long held that payment of disability benefits by an
employer following a compensable injury may give rise to a “pro-
ceeding” within the contemplation of Minn. St. 176.151(1). Ny-
berg v. Little Falls Black Granite Co. 192 Minn. 404, 256 N. W.
732, (1934). Similarly, the payment of medical expenses may
be a “proceeding” that results in tolling the statute of limita-
tions. Knopp v. Gutterman, 258 Minn. 38, 102 N. W. 2d 689
(1960).* These payments amount to “proceedings” within the
contemplation of § 176.151(1) if they are made and accepted

3 See, also, Meinen v. Dashow, 283 Minn. 269, 167 N. W. 2d 730 (1969).

4See, also, Brochu v. United States Steel Corp. 307 Minn. 38, 237 N.

W. 2d 833 (1976); Cowell v. Minnegas Co. 286 Minn, 535, 176 N, W. 2d 84
(1970).

a 161

with the intention of being in lieu of compensation benefits.
Furthermore, the payment of these benefits is required by §
176.521, subd. 1, to be reported to and supervised exclusively by
the commission. To permit an employer to make unreported pay-
ments of the type of benefits compensable under the Workers’
Compensation Act and thereafter assert the statute of limitations
when the employee files an untimely claim would be subversive
of the purposes and objectives of the act. Rasmussen v. City of
St. Paul, 215 Minn. 458, 10 N. W. 2d 419 (1943); Fitzgerald v.
Northwest Automatic Products, Inc. 27 W. C. D. 340 (1974).

Whether such unreported payments are made and accepted
in lieu of compensation is usually a question of fact. The specific
factual question in this case is whether the payments and release
were intended merely as a settlement of the employee’s group.
insurance claim or whether it was also intended to release his
compensation claim. We believe that the testimony of the em-
ployee and the language of the release adequately support the
commission’s finding of an intent to settle and release the em-
ployee’s compensation claim. While the employee’s testimony on
this issue on direct and cross-examination was not wholly consist-
ent, he did explicitly state that he accepted the payment and
signed the release with the understanding that it settled both
claims. The employer offered no directly contradictory testimony
of this or any other issue. More significantly, the language of
the release provided in pertinent part:

«# %* * This agreement shall also release the said insurer from
any disability claim and any major medical for recurrences or
complications from said injuries or illnesses and any and all
claims, past, present or future arising out of employment with
Lumbermens Mutual Casualty Company.” (Italics supplied.)
Although the release, read as a whole, is arguably susceptible
of various interpretations, in the absence of any evidence bearing
on the intention of the employer, the commission was fully justi-
fied in construing it to support the employee’s testimony that

162 ee

it was intended as a settlement of all claims “arising out of em-
ployment,” including his workers’ compensation claim.
Respondent is allowed $400 attorneys fees.
Affirmed.

REPUBLIC NATIONAL LIFE INSURANCE
COMPANY v. MARQUETTE BANK AND
TRUST COMPANY OF ROCHESTER.

251 N. W. 2d 120.

February 18, 1977—No. 46423.

Levitt, Palmer, Bowen, Bearmon & Rotman, Robert M. Bowen,
J. Patrick McDavitt, Michaels, Bishop, Seeger & Rosenblad, and
David T. Bishop, for appellant.

Dorsey, Windhorst, Hannaford, Whitney & Halladay and
Craig A. Beck, for respondent.

eee 163

PETERSON, JUSTICE.

Ina suit for declaratory judgment, the district court held that
plaintiff’s mortgage on certain real property was prior to de-
fendant’s lease and that in the event of foreclosure on the mort-
gage, the property would not be subject to the lease. The court
based its holding on the grounds that plaintiff was a subsequent
purchaser in good faith under the the recording statute, Minn.
St. 507.34,1 and that the lease contained an implied subordination
agreement in favor of the mortgage. On appeal, defendant argues
that the evidence does not sustain either finding.? We reverse.

Plaintiff, Republic National Life Insurance Company (Re-
public), a Texas corporation, holds a mortgage on certain real
estate, including an office building, in Rochester, Minnesota. De-
fendant, Marquette Bank and Trust Company of Rochester
(Marquette) holds a 50-year lease on part of the building. Lor-
raine Realty Corporation (Lorraine) holds part of this real
estate in fee simple and part as lessee under a long term ground
lease. This action arises out of the complex arrangements, under-
taken by these parties and others, to finance construction of the
office building.

In 1961, Marquette (then called the Olmsted County Bank and
Trust Company) began negotiations with various parties for a
new bank building. In 1963, negotiations with Lorraine culmi-
nated in Marquette’s drafting a letter of intent to lease, which
Lorraine used, with Marquette’s consent, to interest lending
institutions in financing construction of the office building. The

1 Minn, St. 507.34 provides: “Every conveyance of real estate shall be
recorded in the office of the register of deeds of the county where such
real estate is situated; and every such conveyance not so recorded shall
be void as against any subsequent purchaser in good faith and for a
valuable consideration of the same real lestate, or any part thereof,
whose conveyance is first duly recorded * * *,”

2 Due to our disposition of the merits, we do not reach defendant’s
other arguments.

164 ee

letter stipulated that the lease contain certain provisions, includ-
ing the following: (1) Marquette would lease for 50 years a
specified amount of space at a specified rent; (2) Marquette
would have an option to purchase; and (8) the building would
be called “The Olmsted County Bank Building.”

Meanwhile, the First National Bank of St. Paul (First Bank)
agreed to make an interim construction loan to Lorraine if Lor-
raine secured from long term lenders commitments to purchase
the loan from First Bank upon completion of construction. Re-
public expressed its interest in providing long term financing
and submitted to First Bank a letter of commitment, dated April
24, 1964, in which it agreed to purchase the loan, provided cer-
tain conditions, including the following, were met: (1) Lorraine
would lease to Marquette for a term of 50 years a specified
amount of space in the building at a specified rent; (2) the loan
would be secured by an assignment of rents due under the lease
and by a first mortgage lien on the land and office building to be
built; and (8) the loan papers would include a title guaranty
policy showing “no exceptions other than those customarily set
out which do not affect the priority of the mortgage lien.”

To ensure that Republic would buy the loan, First Bank made
Republic’s requirements its own. It sent a letter to Lorraine in
which it listed Republic’s requirements as the conditions to its
own loan to Lorraine. Accordingly, Lorraine and Marquette
entered into a lease agreement on June 22, 1964. The lease does
not contain a subordination clause.

Copies of various documents, including the lease between Lor-
raine and Marquette, were then sent to and approved by Re-
public. Subsequently, First Bank made a loan of $1,900,000 to
Lorraine. It took as security a mortgage deed executed on August
21, 1964, and an assignment of rents. The mortgage deed con-
tained a covenant that “the [said premises] are free from all
liens and incumbrances.” First Bank arranged for the mortgage
deed to be recorded on August 31, 1964, and for the lease and as-
signment of rents to be recorded on September 1, 1964.

ee 165

No testimony was offered at trial that Marquette had seen the
mortgage deed, the letter from Republic to First Bank listing
Republic’s requirements, or the letter from First Bank to Lor-
raine reiterating those requirements. None of the witnesses could
testify as to having discussed with Marquette, either orally or
in writing, the subject of priority of the mortgage.

On January 3, 1969, First Bank assigned the mortgage to Re-
public as earlier agreed. Lorraine subsequently defaulted on its
obligation under the mortgage. Desiring to institute foreclosure
proceedings, Republic brought suit for a declaratory judgment
that its mortgage was superior to Marquette’s lease.

A situation thus arose in which Republic knew that Marquette’s
lease predated its mortgage, but at the same time intended its
mortgage to be superior and believed that it was, in fact, superior.
On these facts, Republic argues that it be found to be either a
subsequent purchaser in good faith or the beneficiary of an im-
plied agreement to subordinate the lease.

HE Subsequent Purchaser in Good Faith

In Bergstrom v. Johnson, 111 Minn. 247, 250, 126 N. W. 899,
900 (1910), we listed the following as the prerequisites to bona
fide purchaser status under the recording statute:

“x * © (1) the payment of a valuable consideration; (2) good
faith, without purpose to take an unfair advantage of third per-
sons; and (8) absence of notice, actual or constructive, of out-
standing rights of others.”

The last element is at issue in this case. Republic contends that
although a person may have actual knowledge of a prior un-
recorded conveyance, if he reasonably understood the prior con-
veyance to be subordinate to his own, he is without notice and
may qualify as a bona fide purchaser. Republic argues that be-
fore it can be charged with having notice under the recording
statute, it must have had either actual or constructive knowledge
that the lease created an interest inconsistent with its own inter-

166 —

est. None of the cases cited by Republic supports in the least
its proffered rule. Only one, Watts v. Lundeen, 165 Minn. 300,
206 N. W. 444 (1925), even involves an unrecorded prior con-
veyance. That case, however, is readily distinguishable because
the plaintiff in Watts knew nothing of the prior conveyance nor
did the record disclose any facts which would have put it on
notice.

Marquette, on the other hand, argues that knowledge of the
mere existence of a prior unrecorded conveyance, in this case
a lease, constitutes notice under the recording statute. Both case
law and secondary sources articulate the rule as stated by Mar-
quette. See, e. g., Errett v. Wheeler, 109 Minn. 157, 123 N. W.
414 (1909); Fifield v. Norton, 79 Minn. 264, 82 N. W. 581
(1900) ; McAlpine v. Resch, 82 Minn. 523, 85 N. W. 545 (1901);
20 Dunnell, Dig. (3 ed.) § 10076; 6 Powell, Real Property (Perm.
ed.) par. 916, p. 288. No cited case involves facts similar to those
of the case at bar, but the policy reasons underlying the rule are
no less persuasive in this case.

The purpose of the recording act is to protect third parties
from claims against their property where such claims arise out
of transactions in which they were not participants and about
which they knew nothing. Republic is not such a third party. The
conveyances of the mortgage to First Bank and the lease to Mar-
quette were in effect part of the same transaction, the terms of
which were dictated in large part by Republic. The recording

8 The trial court adopted Republic’s theory. Its memorandum reflects
some confusion, however, between the notice and subordination agree-
ment arguments. It states: “* * * Republic had either actual or con-
structive notice of the existence and exact nature of the lease. But it did
not have notice that the ‘quality’ of Olmsted’s interest was a first lien
capable of defeating its status as a bona fide purchaser. The agreement
of the parties was to the contrary.”

The lack-ofnotice and agreement arguments are logically inconsis-
tent. The fact of an agreement implies knowledge of facts which, in the
absence of an agreement, would give rise to a different result. Such
knowledge is the equivalent of notice.

ee 167

statute cannot in and of itself create rights in Republic superior
to the rights of Marquette when Republic knew of Marquette’s
prior unrecorded conveyance. Republic’s knowledge of the pre-
existing lease precludes its status as a subsequent purchaser in
good faith.*

Republic raises a novel argument. If its theory were to pre-
vail, the beliefs of one party would determine the rights of an-
other, however innocent the latter. We will not so casually ex-
tinguish the rights of an innocent party. See Bergstrom v. John-
son, 111 Minn. 247, 252, 126 N. W. 899, 901 (1910).

implied Subordination Agreement

There is ample evidence to support the conclusions that Re-
public intended its mortgage to be prior to the lease and that both
First Bank and Lorraine understood Republic’s intention and
purported to give it that effect. The dispositive issue is whether
Marquette, in fact or in law, agreed to subordinate its lease. The

4 Republic cites the case of Target Stores, Inc. v. Twin Plaza Co. 277
Minn. 481, 153 N. W. 2d 832 (1967),.as additional support for its argu-
ment that it had no reason to know the lease represented a claim ad-
verse to its own. We held in Target that a “lease” of space in a build-
ing never constructed was merely an agreement to lease, passed no
interest in land, and did not render title to the real estate unmarketable
upon sale to a third party. Target is not dispositive of the instant case
for several reasons. (1) The operation of the recording statute was not
at issue in Target. (2) That case, unlike this one, involved a third party
who was not a participant in the earlier “lease” transaction. (3) What-
ever the nature of the interest created by the leases in Target and in
this case, plaintiff's mortgage on a building not yet constructed was no
less executory. In this case the building was constructed as planned; and

* plaintiff’s obligation to buy the mortgage was in fact contingent upon
completion of construction. (4) Finally, plaintiff dees not argue that.
defendant’s lease was not a recordable conveyance. Whatever the na-
ture of defendant’s lease, plaintiff took subject to it.

5 Our holding in this case intimates nothing with regard to what the
result would be were defendant not innocent. No argument is made that
Marquette knew of Republic’s intention or belief nor does any evidence
adduced at trial support such an argument.

168 ee

trial court found that it did. Its findings are not to be set aside
unless clearly erroneous. Rule 52.01, Rules of Civil Procedure.

The trial court relies upon circumstantial evidence to support
its finding of an implied subordination agreement. In order to
support a particular verdict, circumstantial evidence need not
be such that it must exclude every other theory, but the theory
embraced by the verdict must outweigh any conflicting infer-
ences. Martelle v. Thompson, 283 Minn. 279, 167 N. W. 2d 376
(1969) ; Raymond v. Baehr, 282 Minn. 102, 163 N. W. 2d 54
(1968). Where the evidence, viewed cumulatively, could sustain
with equal justification either of two inconsistent inferences,
the proponent of the theory has failed to meet its burden of
proof. Smith v. Kahler Corp. Inc. 297 Minn. 272, 211 N. W. 2d
146 (1973) ; E. H. Renner & Sons, Inc. v. Primus, 295 Minn. 240,
208 N. W. 2d 832 (1973) ; Village of Plummer v. Anchor Cas. Co.
240 Minn. 355, 61 N. W. 2d 225 (1953); Burke v. B. F. Nelson
Mfg. Co. 219 Minn. 381, 18 N. W. 2d 121 (1945). Mere specula-
tion or conjecture will not support a verdict. Smith v. Kahler
Corp. Inc. supra; Martelle v. Thompson, swpra; Raymond v.
Baehr, supra. These principles guide our consideration.

The court bases its finding of an implied subordination agree-
ment on inferences drawn from three clauses in the lease and
from the conduct of the parties. One such clause gives Marquette
the right to cure any defaults of Lorraine under any mortgage
placed upon the property.* A second clause gives Marquette an
option to purchase the building. Republic argues that neither of
these clauses would be necessary were Marquette’s lease not
subject to forfeiture in the event of a mortgage foreclosure. On
oral argument, however, Marquette contended that the actual

6 This clause provides: “After receipt of notice, whether from Land-
lord [Lorraine] or otherwise, Tenant [Marquette] shall, during the
term of this lease, have the unrestricted right at its option to pay and
perform any of Landlord’s obligations under said Ground Lease or any
said mortgage [now or hereafter placed] upon the real property de-
scribed in Section 101 of this lease and to cure any default thereunder.”

ee 169

purpose of the cure provision was to protect its option to pur-
chase. The only testimony at trial with regard to the cure provi-
sion was that of the president of Lorraine, who stated that the
clause was required by Mr. Scallen, an officer of Marquette.

Where the evidence is documentary, we are as qualified as the
trial court to draw inferences therefrom. In re Trust Known as
Great Northern Iron Ore Properties, 8308 Minn. 221, 243 N. W.
2d 802, certiorari denied sub nom. Arms v. Watson, 429 U. 8S.
1001, 97 S. Ct. 530, 50 L. ed. 2d 612 (1976). In the absence of any
testimony on the issue of Marquette’s intent with respect to in-
clusion of that clause, we will not hold that, as a matter of law,
the cure provision implies subordination.’ The inference that
its purpose was to protect Marquette’s option to purchase would
be equally justified. Similarly, an inference of subordination
drawn from the option to purchase clause would be conjectural.

The third clause relied upon by the court is Lorraine’s cov-
enant that “except for said aforementioned Ground Lease and
any said mortgage [now or hereafter placed against the real
property],” it would “* * * keep said real property * * * free
and clear of any liens and encumbrances.” This clause says noth-
ing explicitly about priorities. An inference that the mortgage
is subordinate is arguably as consistent with that phrase as is
an inference that the mortgage is superior.

The court also considered the conduct of the parties, apart
from the lease itself, to support its finding of an implied sub-
ordination agreement. The court found:

“That, it was understood by Olmsted that the lease in question
was necessary to the granting of a loan and, without a loan, the
lease would have been of no effect and the building would not
have been built.”

7 The weakness of the trial court’s inference is suggested by the fact
that the clause must then as readily support the inference that the lease
would be subordinate to any and all subsequent mortgages placed on
the property.

170 ee

With respect to this finding of fact, it should be noted that this
financing arrangement was a business transaction intended to
be mutually beneficial to Marquette and Republic. Marquette ac-
quired new facilities in a building bearing its name. Republic
is an insurance company which presumably engaged in this
transaction as a profitmaking venture and wanted a prime
tenant to assure itself that it was economically sound to build
a large office building in Rochester. It would be conjecture to
say the fact that Marquette knew its lease was a prerequisite to
the loan implies an agreement by Marquette to subordinate its
lease to the mortgage. The fact that Marquette knew its 50-year
lease of a substantial portion of the building was essential to re-
public would seem to be equally consistent with—or at least no
less conjectural than—Marquette’s receiving priority as an in-
ducement to commit itself to a 50-year lease.

The court also found:

“That, although Olmsted retained an executed original of the
lease after it was signed on June 22, 1964, Olmsted did not file
said Lease with the Register of Deeds for Olmsted County.”

The problem with this finding of fact is that prior recording
establishes priority only where the first to record was not on
notice of the unrecorded prior conveyance. Thus, Marquette did
not need to record the lease in order to protect itself against First
Bank, who knew of and required its lease. Republic’s further
observation that “Marquette obviously allowed First Bank to
handle details of recording thus permitting the mortgage to be
recorded prior to the lease,” is subject to the same objection.

Viewed cumulatively, the inferences are not enhanced. Re-
public has failed to meet its burden of proof on this issue.? No

8 The trial court seems to have taken judicial notice that a financial
institution in Republic’s position would structure the transaction. so as
to have a first mortgage subject to no encumbrances and to have
charged Marquette with this knowledge. This is not a proper subject
for judicial notice. If it is in fact the custom, it has not been proven.

ee 171

subordination agreement having been proven, the prior con-

veyance is superior. In the event of a foreclosure sale the pur-

chaser will take the property subject to Marquette’s lease.
Reversed.

POLIVKA LOGAN DESIGNERS, INCORPORATED v.
AL ENDE, dba. A & E CEMENT & MASONRY
COMPANY AND OTHERS.
FABCON, INC., APPELLANT. °
PRECISION ENGINEERING COMPANY,
RESPONDENT.

251 N. W. 2d 851.

February 18, 1977—Nos. 46606, 47089.

Moore, Costello & Hart and Larry A. Hanson, for appellant.
John M. Janes, for respondent.

Heard before Rogosheske, Peterson, and Kelly, JJ., and con-
sidered and decided by the court en banc.

172

KELLY, JUSTICE.

Appellant, Fabcon, Inc., appeals from summary judgment
entered in Hennepin County District Court dismissing its me-
chanics lien. We reverse.

The facts are uncontroverted. Fabcon was a subcontractor
that furnished precast concrete structural members for the
expansion of a commercial building owned by respondent, Pre-
cision Engineering Company. Precision Engineering engaged
Al Ende, doing business as A & E Cement & Masonry Company,
as general contractor for the construction work. Polivka Logan
Designers, Inc., also subcontracted with Al Ende and provided
architectural services for the project. The addition to the build-
ing, completed during the summer of 1974, increased its usable
floor space from approximately 6,000 square feet to approximate-
ly 11,415 square feet.

Both Fabcon and Polivka filed mechanics liens against the
property and neither was paid for its work. In June 1975,
Polivka brought the instant action to foreclose its lien. In a cross-
claim Fabcon sought, inter alia, foreclosure of its lien. Precision
Engineering moved for summary judgment dismissing Fabcon
from the action and dismissing its mechanics liens. The trial
court granted the motion on the ground that each subcontractor
had failed to give Precision Engineering the notice required by
Minn. St. 514.011, thereby engendering the issue to be resolved
on this appeal.

Minn. St. 514.011, enacted in 1978, requires that contractors
and subcontractors provide an owner written notice of the pos-
sibility of subcontractor’s mechanics liens and of the procedures

1The other defendants ‘to the action were Al Ende, the general con-
tractor; Heberg & Sons Co., a subcontractor that gave the notice re-
quired by Minn. St. 514.011 and whose lien was satisfied by Precision
Engineering; Steel Structures, Inc., a subcontractor whose lien was also
dismissed by the trial court; Citizens State Bank of St. Louis Park, a
mortgagee of the property; and Aetna Business Credit, Inc.

— 173

owners might pursue to prevent loss of their property.? The
giving of notice is “a necessary prerequisite to the validity of any
claim or lien.” Minn. St. 514.011, subd. 2. The evident purpose
of the statute was to alert a property owner to the risk of double
liability if his contractor failed to pay its subcontractors. See,
also, Spannaus, Mechanic’s Lien Law Reform, 41 Hennepin
Lawyer 10; Nygren, Mechanics Lien Laws as Amended by the
1978 Minnesota Legislature, 42 Hennepin Lawyer 8. Not all
owners, however, are entitled to receive notice. Minn. St. 514.011,
subd. 4, provides:

“The notice required under this section shall not be required

2Minn. St. 514.011, subd. 2, requires that subcontractors provide the
following notice:
“Notice oF OWNER
To: (name and address of owner)
“We are authorized by law to provide you with this Notice. Your
failure to read it carefully could result in unnecessary expense to you

or in the loss of your .........--.+--- AL cece ce eeeeceeetreeeeeesees
(type of property) (address of property)
FW), cece cece cece eee eee nee » have been hired by your Conrracror,

(name and address)
(of subcontractor)

wee . to provide .. for use in improv-
(name of contractor) (type of service)
(or material)
ing your property. We estimate our charges will be ................05
(value of service)
(or material)

If we are not paid by your Conrracror, we can file a claim against your
property for the price of our services unless you have aLrmapy paid
your Contractor in full. ENrorcEMENT OF OUR CLAIM COULD MEAN THE
LOSS OF YOUR PROPERTY IF YOU ARE UNABLE TO PAY US FOR OUR SERVICES.

“To protect yourself, Minnesota law allows you to either:

“1, Withhold payment to your Contractor for up to 90 days from the
completion of the improvement or until he provides you with a waiver
of claim from us which states that we will not file a claim against your
property; or

“2, Pay us directly and deduct the amount paid from the amount
you owe your ConTRACToR.””

174 ee

to be given * * * in connection with an improvement to real
property consisting of or providing (i) more than four family
units and the improvement is wholly residential in character,
or (ii) more than 10,000 total usable square feet of floor space
and the improvement is partly or wholly nonresidential in char-
acter.” (Italics supplied.)

Since appellant did not give notice, the applicability of subdi-
vision 4 governs this appeal.

Appellant contends that the last exception is applicable here
since the usable floor space of the commercial building after the
construction work was greater than 10,000 square feet. The
trial court disagreed, stating: “The word ‘improvement’ in the
statute does not refer to the final integrated end product but
only to the actual addition of some improvement to a particular
parcel of real estate.”

Unfortunately, we cannot agree with the district court’s in-
terpretation of § 514.011, subd. 4. We interpret “improvement”
as appellant does and construe the exception to apply to partly
or wholly nonresidential structures that contain more than
10,000 usable square feet of floor space either before or after
the construction work in question. This interpretation appears
to be the most reasonable meaning to be attributed to the
language in subdivision 4, and, in addition, other considerations
support our conclusion.

Section 514.011 was intended to protect homeowners and small
businessmen who out of ignorance might be forced to pay first
the contractor and then the subcontractor. Subdivision 4 in
relevant part was the legislature’s designation of larger business-
men who do not require such protection. An interpretation of
“improvement” that includes only the floor space provided by
the work in question appears to confound the legislature’s design.
An example of this flaw would be an existing one-million-square-
foot building which a contractor improves by adding a new ad-
dition consisting of 9,000 usable square feet of floor space. Urider
the trial court’s interpretation, the owner of the building would

a 115

pe entitled to notice. Another example; Assume an electrical
contractor rewired and furnished other labor and materials on
an existing building containing 40,000 square feet of usable
space. He would be required to give notice to the owner or lose
his lien rights. This would not be so if he did the same work in
the initial construction of a new building of 10,000 or more
square feet of usable space. We do not think the legislature in-
tended these incongruous and unreasonable results. Minn. St.
645.17(1). Moreover, there is no significant reason for dis-
tinguishing an owner of a building the floor space of which is
increased to more than 10,000 square feet by new construction
work and an owner who initially constructs a building of the
same size and who would not be entitled to notice. Admittedly,
the legislative demarcation at 10,000 square feet of floor space
is somewhat arbitrary (as are all such classifications), but that
demarcation must nevertheless be interpreted reasonably. The
interpretation we adopt is at the least consistent with the legisla-
tive history of § 514.011, subd. 4.3

We do not think our interpretation is inconsistent with the
statutory language. The work, labor and materials, were
furnished and performed “in connection with an improvement
to real property consisting of or providing * * * more than

The legislative history of subdivision 4 is somewhat sketchy. As
originally introduced in the legislature, the exception stated: “The no-
tice, required under this section shall not be required to be given by
mechanics, laborers and (materialmen furnishing labor, skill or ma-
terials for an improvement of real property in any case where more
than four family living units are to be provided or added by such work
of improvement, if the improvement is wholly residential in character,
or in any case where more than 10,000 total usable square feet of floor
space is to be provided or added by such work of improvement, if the
improvement is partly or wholly nonresidential in character.” Senate
File 6, § 2, subd. 3; House File 711, § 2, subd. 3. (Italics supplied.) No ex-
planation appears for the amendment of the bill to its final form. It
seems reasonable to presume, however, that the emphasis in the
original bill on the square footage provided by the new construction
work was altered to avoid the results discussed above.

176

10,000 total usable square feet of floor space.” The original
building and the addition created an improvement consisting of
or providing more than 10,000 “total’’ usable square feet of
floor space. The word “total” would have no real significance
if the existing square footage were not added to the new addition
to determine whether or not the improvement came within the
statutory exemption.

Appellant points to a line of cases liberally construing Minn.
St. c. 514 in favor of the lien claimant. See, e. g., Armco Steel
Corp. v. Chicago & N. W. Ry. Co. 276 Minn. 183, 149 N. W. 2d
23 (1967). But because the legislature enacted § 514.011 to
remedy the unfairness arising from the foreclosure of mechanics
liens on property of unsuspecting owners, the section is remedial
in character and therefore should be liberally construed, Blank-
holm v. Fearing, 222 Minn. 51, 22 N. W. 2d 853 (1946), and thus
exceptions to it should be narrowly construed. These construction
presumptions appear to counterpoise and we do not rely on
either of them in deciding this case.

We hold that § 514.011, subd. 4(ii), applies to those nonresi-
dential structures whose usable floor space consists of more than
10,000 square feet either before or after the construction work
for which notice may be required. Because the expansion of the
building owned by Precision Engineering increased its floor
space to more than 10,000 square feet, appellant was not required
to give notice to Precision Engineering. Therefore, the trial
court’s entry of summary judgment for Precision Engineering
must be reversed.

Reversed and remanded.

—— 177

NORTHERN NATURAL GAS COMPANY v.
COMMISSIONER OF REVENUE.

251 N. W. 2d 125,

February 18, 1977—No. 46544.

Te
Lindquist & Vennum and David E. Krause, for relator.
Warren Spannaus, Attorney General, C. H. Luther, Deputy
Attorney General, and Arthur J. Glassman, Special Assistant
Attorney General, for respondent.

Heard before Kelly, Todd, and Winton, JJ., and considered
and decided by the court en banc.

Topp, JUSTICE.

Northern Natural Gas Company (Northern) filed a consoli-
dated Federal income tax return for the tax years in question.
Northern and each of its subsidiaries prepared their own sepa-
rate tax returns. The subsidiaries forwarded their returns to
Northern, together with a check payable to Northern in, an
amount equal to the tax due if the subsidiary had filed separate-
ly. Some of the subsidiaries incurred losses which had the effect
of reducing the overall tax liability on the consolidated tax re-
turn. Therefore, the payments received by Northern from its

178 es

subsidiaries, when added together, exceeded the amount of actual
tax paid by the group on their consolidated return. Northern
distributed the “excess payment” to the “loss subsidiaries” in
proportion to the amount that each subsidiary’s individual loss
decreased the group’s ultimate tax liability on the consolidated
return. On its Minnesota income tax return, Northern claimed
its share of the payments made to reimburse the loss subsidiaries
for consumption of their individual losses on the consolidated
Federal return as a deduction under Minn. St. 1969, § 290.09,
subd. 4. This claimed deduction was disallowed by both the com-
missioner of taxation and the Tax Court. We affirm. ,

The matter was submitted to the Tax Court accompanied by
a stipulation of facts that provided:

“1, On June 9, 1972, the Commissioner issued his Order
establishing an additional corporate income tax liability for
Northern for the five tax years ending December 31, 1957
through December 31, 1961. On March 23, 1973, the Commis-
sioner issued a second Order denying Northern’s claim for a
refund of part of the Minnesota income taxes paid by Northern
for the same five years.

“2. The sole issue involved in this appeal is what constitutes
the proper method of computing the deduction for Federal in-
come taxes allowable under [Minn. St. 1969,] § 290.09, Subd.
4, Northern timely filed a claim for refund for the years in
question which claim was denied by the Commissioner.

“3, Northern is a Delaware corporation principally engaged
in the business of finding, processing, transporting and selling
natural gas in many states, including the State of Minnesota.
Northern’s principal offices are located at 2223 Dodge Street,
Omaha, Nebraska.

“4, During the years in question, Northern was the sole
owner of several subsidiary corporations that were engaged in
businesses that complemented the operation of Northern.

“5, At the close of each of the years, Northern and each sub-
sidiary calculated their Federal income tax liability on a separate

De 179

return basis. Those subsidiaries having Federal taxable income
on a separate return basis paid the amount of their Federal tax
liability so calculated over to Northern.

“6. During each of the years, Northern prepared and filed
a consolidated Federal income tax return covering itself and its
subsidiaries for each of the tax years ending December 31, 1957,
through December 31, 1961. Due to net operating losses incurred
in each of the years other than 1957 by certain of the subsidi-
aries, a tax savings was effected by reducing the Federal income
taxes of Northern’s consolidated group.

“7, Northern paid these tax savings to each subsidiary in
the consolidated group suffering a loss by paying it an amount
equal to the sum that its net operating losses reduced the
Federal income tax liability of the consolidated group.

“8. During each of the years in question, Northern’s share
of Federal income taxes actually paid to the United States by
Northern on behalf of the consolidated group plus Northern’s
share of the payments made by Northern on behalf of the con-
solidated group to the loss subsidiaries equaled Northern’s
Federal income tax liability computed on a separate return
basis.

“9. Northern’s Federal taxable income, computed on a separ-
ate return basis, was as follows for each of the tax years in ques-
tion:

“1957 $21,824,798
1958 18,530,041
1959 22,901,030
1960 32,748,004
1961 28,464,673

“10. Northern’s share of the sums actually paid by Northern
within the years in question on behalf of the consolidated group
to the loss subsidiaries included in the consolidated return was as
follows for each of the years in question:

“1957 $ (30,438)
1958 1,776,787

1959 1,689,277

1960 612,520
1961 319,829

“11. Northern’s share of the amount of Federal income tax
which the consolidated group actually paid over to the United
States was as follows during each of the years in question:

“1957 $10,999,008
1958 10,919,709
1959 7,710,026
1960 11,241,326
1961 21,428,388

For each of the years in question, Northern’s share of the
Federal income tax actually paid by the consolidated group was
calculated by multiplying the total tax payments actually made
during the year in question to the United States by the following
fraction:
“Northern’s Federal taxable income for the year in question com-
puted on a separate return basis
The combined taxable income of the gain companies included in
the consolidated group for the year in question.
The Commissioner allowed Northern the sums stated above in
this paragraph as deductions under [Minn. St. 1969,] § 290.09,
Subd. 4.

“12. Northern claims as a deduction under [Minn. St. 1969,]
§ 290.09, Subd. 4, for each of the years in question an amount
equal to its share of the taxes actually paid by the consolidated
group to the United States during the year plus its share of the
payments made during the year by the consolidated group to the
loss subsidiaries included in the group. If Northern’s method of
computing the deduction under [Minn. St. 1969,] § 290.09, Subd.
4, is correct, Northern is entitled to refunds or owes additional
taxes in the following sums for the tax years in question:

“1957 $ (402)
1958 23,336

De 181

1959 28,737
1960 11,085
1961 6,058”

The Tax Court also received evidence, in the form of expert
testimony, that the reimbursement procedure employed by
Northern and its subsidiaries met generally accepted accounting
practices.

The sole issue for review is whether a Minnesota corporate
taxpayer which elects to file a consolidated Federal income tax
return can deduct, as “taxes paid” under Minn. St. 1969,
§ 290.09, subd. 4, its share of amounts distributed, at its own dis-
eretion, to “loss subsidiaries” in proportion to the amount that
their losses reduced the ultimate Federal tax liability of the con-
solidated group for the tax years in question.

It is Northern’s position that the reimbursements paid to the
loss subsidiaries should be considered, for purposes of § 290.09,
subd. 4, as “taxes paid” within the taxable years under considera-
tion. This argument is based primarily on the rationale that the
reimbursements made to the loss subsidiaries are equivalent to
an indirect payment of Federal income taxes and therefore are
deductible.

The right of a corporate taxpayer to deduct from its Minnesota
income tax return the amount of Federal income taxes paid for
the tax years under consideration in this case was governed by
§ 290.09, which provided in part :+

“Subdivision 1. The following deductions from gross income
shall be allowed in computing net income, * * *
+ + ke OF
“Subd. 4. Taxes paid or accrued within the taxable year,
except (a) income or franchise taxes imposed by this chapter;
(b) taxes assessed against local benefits of a kind deemed in law
1 This statute was amended by Ex. Sess. L. 1971, c. 31, art. 6, § 6, which

made Federal income taxes payable by corporations nondeductible in
computing Minnesota income tax.

182 es

to increase the value of the property assessed; (c) inheritance,
gift and estate taxes except as provided in Minnesota Statutes,
Section 290.077, Subdivision 4; (d) cigarette and tobacco pro-
ducts excise tax imposed on the consumer; and (e) that part of
Minnesota property taxes for which a credit or refund is claimed
and allowed under Section 290.0603. Income taxes permitted to
be deducted hereunder shall, regardless of the methods of ac-
counting employed, be deductible only in the taxable year in
which paid. Taxes imposed upon a shareholder’s interest in a
corporation which are paid by the corporation without reim-
jursement from the shareholder shall be deductible only by such
corporation.”

It is a well-established rule in the law of income taxation that
deductions are a matter of legislative grace and therefore stat-
utes that provide for such deductions should be strictly con-
strued. See, Commr. of Int. Rev. v. Nat. Alfalfa Dehydrating &
Mill. Co. 417 U. S. 184, 94 8. Ct. 2129, 40 L. ed. 2d 717 (1974) ;
Commissioner v. Sullivan, 356 U. S. 27, 78 S. Ct. 512, 2 L. ed. 2d
559 (1958). A necessary corollary of this general rule is that a
taxpayer claiming to be entitled to a deduction is required to
demonstrate that his claim is allowable under the terms of the
statute. See, Interstate Transit Lines v. Commr. of Int. Rev. 319
U.S. 590, 63 S. Ct. 1279, 87 L. ed. 1607 (1948).

The Tax Court, in disallowing Northern’s claimed deductions,
concluded that the payments made to the loss subsidiaries were
not “taxes” within the meaning of Minn. St. 1969, § 290.09, subd.
4. In reaching this determination, the Tax Court relied on its
earlier decision in Minnesota Amusement Co. v. Commr. of Taxa-
tion, Docket Nos. 663 and 666, entered September 24, 1957.

In Minnesota Amusement, a corporate subsidiary taxpayer
sought to deduct on its Minnesota income tax return as “taxes
paid” the amount forwarded to the parent corporation which rep-
resented the tax liability on its individual return. However, as
‘in the present case, the use of several subsidiaries’ net operating
losses resulted in a reduction of the group’s ultimate liability on

ee 183

the consolidated return. In limiting the subsidiary’s deduction
to a sum which represented its proportionate share of the tax
payment actually transmitted to the Federal government by the
consolidated group, the Board of Tax Appeals (now the Tax
Court) stated:

«* # * Tt is the opinion of this Board that in order to qualify
as a deduction under this section the federal income taxes must
actually be paid and the payment of an amount to the parent who
acts as agent does not satisfy the law except as to the amount
that the parent, as agent, actually pays as taxes for and on behalf
of Taxpayer.” 2

Although the Tax Court has had the opportunity to interpret
the words “taxes paid,” this is the first time the question has
been presented to this court. Northern argues that the aforemen-
tioned decisions of the Tax Court should be disregarded since
they did not directly address the issue of the deductibility as
“taxes paid” of amounts distributed by a parent corporation to
loss subsidiaries. While factual distinctions do exist between the
present case and the prior Tax Court decisions, we fail to per-
ceive any reason why the Tax Court’s interpretation of the words
“taxes paid,” appearing in Minn. St. 1969, § 290.09, subd. 4, is
inapplicable.

Other state courts have considered cases involving statutory
language similar to our statute and the position advocated by
Northern has been rejected. Representative of these cases is Con-
tinental Tel. Co. of Utah v. State Tax Comm. 539 P. 2d 447
(Utah, 1975), in which the Supreme Court of Utah was faced
with the issue of whether subsidiaries can deduct, as “taxes
paid” on their Utah income tax returns, payments transferred
to the parent corporation in connection with the preparation and
payment of a consolidated tax return. The Utah State Tax Com-
mission had reduced the amount of the subsidiaries’ claimed de-

2 Accord, Prom, Inc. v. Commr. of Taxation, Docket No. 755, entered
September 22, 1960.

184 Dh
ductions to the proportion that their Federal taxable income
would bear to the total amount of Federal tax actually paid by
the parent corporation on the consolidated return. In affirming
the tax commission’s determination, the Utah Supreme Court
enunciated a statutory interpretation with which we agree (539
P. 2d 451):

«# * # A portion of each payment is diverted by the parent
corporation to its various subsidiaries that are suffering operat-
ing losses, allowing such subsidiaries to obtain current use of
their net operating losses rather than to await profitable years
when such net operating losses could be carried forward and de-
ducted from net income at that time. * * *

«x & & We agree with the view of the Tax Commission that
our statutes do not contemplate such a transfer as a deduction
from net state income unless such payments are actually paid
to the federal government,

“Tt is further our opinion that the fair and reasonable inter-
pretation of the term ‘taxes paid’ * * * is that it means a de-
duction for taxes paid or accrued which are actually paid or ac-
erue to the taxing entity (IL.R.S.) * * #78

The only case which supports Northern’s position is the
Kansas decision in Cities Service Gas Co. v. McDonald, 204 Kan.
705, 466 P. 2d 277 (1970). In Cities Service, a profitable Kansas
subsidiary corporation forwarded to the parent corporation its
separate income tax return together with a check for an amount
equal to the subsidiary’s separate Federal tax liability. However,
as a result of several other subsidiaries suffering net operating
losses for the tax year in question, the consolidated income tax
return filed by the parent on behalf of the group generated a tax
refund from the Federal government. The Kansas subsidiary

8 Accord, Buick Motor Co. v. City of Milwaukee, 48 F. 2d 801 (7 Cir.
1931), certiorari denied, 284 U. 8. 655, 52 S. Ct. 34, 76 L. ed. 556; Standard
Oil Co. v. State, 55 Ala. App. 103, 318 So. 2d 582 (1975); State v. Western
Grain. Co. 55 Ala. App. 690, 318 So. 2d 719 (1975); Trunkline Gas Co. v.
Collector of Rev. 182 So. 2d 674 (La. App. 1965).

ee 185

sought to deduct, on its Kansas income tax return, the amount
it forwarded to the parent corporation. Despite the fact that the
consolidated group never paid the Federal government any tax
for the tax year in question, the Kansas Supreme Court allowed
a deduction, under its statute, for the amount paid by the sub-
sidiary to the parent corporation.

In the present case, the Tax Court was able to distinguish the
Cities Service decision based upon a difference in statutory lan-
guage between the Kansas statute and Minn. St. 1969, § 290.09,
subd. 4. The Kansas statutory scheme would allow a deduction
for Federal income taxes “paid or incurred.” Such language does
not appear in our statute. The inclusion of this additional lan-
guage could be construed to allow a deduction of an amount not
actually transmitted to the Federal government as a tax pay-
ment. However, we have reviewed the Cities Service decision at
length and are not persuaded that it represents a proper appli-
eation of legal principles irrespective of the additional statutory
language.

Northern sought to bolster its position through the presenta-
tion of competent evidence that the accounting procedure in-
volved herein was consistent with generally accepted accounting
methods. We do not dispute this testimony. The accounting
methods employed by Northern represent the proper manage-
ment of internal cash flow once the parent elects to file a con-
solidated income tax return. However, there are no requirements
under Federal law that the loss subsidiaries be reimbursed for
the consumption of their losses by the group to reduce the overall
tax liability of the group on the consolidated income tax return.

Thus, we hold that the words “taxes paid” in Minn. St. 1969,
§ 290.09, subd. 4, only allow a deduction for tax payments ac-
tually transmitted to the governmental taxing entity. Although
Northern’s reimbursement procedure may be founded upon an
efficient and accepted accounting practice, to treat this voluntary
payment in the same manner as funds compelled to be paid to
the United States government under its tax laws represents, to

186 ee

this court, an illogical extension of the rather simple term “taxes
paid” as it appears in our statute.

Affirmed.

Mr. Cuter Justice SHERAN took no part in the consideration
or decision of this case.

||
IN RE PETITION OF ALLEN H. STOLTZMANN v.
COUNTY OF RAMSEY AND ANOTHER.
251 N. W. 2d 130.

February 18, 1977—No. 46488.

Williom A. Stoltzmann, for appellant.

—— 187

William B. Randall, County Attorney, and Thomas M. Quale
and Steven C. DeCoster, Assistant County Attorneys, for re-
spondent county.

Warren Spannaus, Attorney General, and Thomas E. Schmidt,
Special Assistant Attorney General, for respondent state.

MACLAUGHLIN, JUSTICE.

This is an appeal from a judgment of the district court refus-
ing to change the assessment valuation of petitioner’s real prop-
erty, and awarding judgment to the County of Ramsey for the
unpaid portion of the original amount of the 1978 real estate
taxes on petitioner’s property. The petitioner had claimed that
the valuation of his property for the year 1973 should be reduced,
with a resulting decrease in real estate taxes, because of a fire
which substantially destroyed his homestead on April 29, 1973.
Because we find no statutory authority for such midyear valua-
tion reduction, we affirm the district court.

The parties submitted the case to the district court upon a
stipulation as to the following facts. At all times material to this
action, petitioner Allen H. Stoltzmann owned certain real prop-
erty located at 625 North Winthrop in St. Paul, Ramsey County,
Minnesota, on which a building was located and occupied as his
homestead. On January 2, 1973, petitioner’s property was valued
by the county assessor at $39,000, an amount agreed by the
parties to have been reasonable and accurate.

On April 29, 1978, a fire substantially destroyed the home-
stead, in consequence of which the reasonable market value of
the property was reduced to $5,000. Shortly thereafter, repair
and reconstruction of the premises began and continued during
the next 6 months. By October 30, 1978, upon completion of the
rebuilding, the property was restored to its original value of
$39,000, and petitioner was able to reoccupy the premises.

After the fire, petitioner asked the assessor to reduce the as-
sessment of his property for 1978 to reflect its diminished value

188 ee

from April 29 to October 30, 1973. The assessor refused to
change the amount of the assessment made on January 2, 1973,
notwithstanding the fire damage, because Minn. St. 1974,
§ 273.01, provides that “[a]ll real property subject to taxation
shall be listed and assessed every odd numbered year only with
reference to its value on January 2 preceding the assessment
eR RL

Petitioner subsequently paid a portion of the general taxes and
special assessments levied for 1973 and payable in 1974, as re-
quired by Minn. St. § 278.03 in order to preserve his right of ap-
peal, and filed a petition for review thereof with the district
court.

The district court concluded that the assessor’s refusal to
change the amount of the assessment of petitioner’s property
made on January 2, 1973, was in compliance with existing law,
notwithstanding the fire damage, and did not violate the provi-
sions of Minn. St. ec. 272 and 278, Minn. Const. art. 10, § 1,? or
U.S. Const. Amend. XIV. The district court found that Ramsey
County was entitled to the amount of the 1973 real estate taxes
as originally determined.

I The petitioner contends that the assessor is required by
the applicable statutes to reduce immediately the valuation of
@ parcel of real property if it is substantially destroyed sub-
sequent to its January 2 valuation as provided in Minn, St. 1974,
§ 273.01.

Petitioner argues that the statutory authority to make such

1Minn. St. 273.01 has been amended so that it presently provides in.
part: “All real property subject to taxation shall be listed and at least
one-fourth of the parcels listed shall be appraised each year with refer-
ence to their value on January 2 preceding the assessment so that each
parcel shall be reappraised at maximum intervals of four years. All real
property becoming taxable in any year shall be listed with reference
to its value on January 2 of that year.”

2Minn. Const. art. 10, § 1, was numbered art. 9, § 1, until the 1974
amendment to the Constitution.

ee 189

a reduction in value may be found in Minn. St. 1974, § 273.01,
which provides in part:

“All real property subject to taxation shall be listed and as-
sessed every odd numbered year with reference to its value on
January 2 preceding the assessment, and all real property be-
coming taxable any intervening year shall be listed and assessed.
with reference to its value on January 2 of that year. * * * The
county assessor or any assessor in any city of the first class may
* * ® correct any errors in valuation of any parcels of property,
that may have been incurred in the assessment * * *, Not more
than two percent of the total number of parcels in his jurisdic-
tion may be corrected after the dates specified herein * * *.”
(Italics supplied.)

Because the assessor is given authority to “correct any errors,”
petitioner claims that the assessor is required to change his
valuation since the destruction of his homestead on April 29,
1978, obviously changed the value of petitioner’s property as of
that date. However, this provision of the statute is provided to
give the assessor limited authority to correct errors when he has
made a bona fide mistake with respect to his valuation as of
January 2. This is made clear through the use of the words “that
may have been incurred in the assessment” and by the limited
authority to correct no more than 2 percent of the total number
of parcels in the assessor’s jurisdiction. If the legislature had
intended this language to include authority to make corrections
because of destruction or improvements, it would not have re-
ferred to “errors in valuation of any parcels of property, that
may have been incurred in the assessment,” and could easily have
expressed such authority precisely and clearly.

Petitioner also relies upon the language of Minn. St. 1974,
§ 278.17, subd. 1,3 which provides:

3 Minn. St. 273.17, subd. 1, has been amended and presently provides
in part: “In every year, on January 2, the assessor shall also assess all

190 ee

“In every even-numbered year, on January 2, the assessor shall
also assess all real property that may have become subject to
taxation since the last previous assessment, including all real
property platted since the last real estate assessment in the odd-
numbered year, and all buildings or other structures of any kind,
whether completed or in process of construction, of over $100
in value, the value of which has not been previously added to or
included in the valuation of the land on which they have been
erected. * * *

«x & * In case of the destruction by fire, flood, or otherwise
of any building or structure, over $100 in value, which has been
erected previous to the last valuation of the land on which it
stood, or the value of which has been added to any former valua-
tion, the assessor shall determine, as nearly as practicable, how
much less such land would sell for at private sale in consequence
of such destruction, and make return thereof to ithe auditor.”
(Italies supplied.)

Petitioner argues that the provision referring to the destruc-
tion of a building requires the assessor to revalue the property
on which the building stood as of the date of the destruction. The
county contends that the assessor’s duty is to reassess such prop-
erty only on the succeeding January 2, based upon its decreased
market value on that date because of the damaged building.

Our interpretation of the statute supports the county’s posi-
tion. The intent of Minn. St. 1974, § 278.17, subd. 1, was to add
to the tax rolls on January 2 of every even-numbered year all real
property which had become subject to taxation since the previous
assessment on January 2 of every odd-numbered year. Included
would be property previously exempt and increases in property

real property that may have become subject to taxation since the last
previous assessment, including all real property platted since the last
real estate assessment, and all buildings or other structures of any kind,
whether completed or in process of construction, of over $1,000 in value,
the value of which has not been previously added to or included in the
valuation of the land on which they have been erected. * * *”

—— 191

valuation caused by buildings which were newly constructed or
improved since the last assessment. Because of this provision,
the assessor was not required to wait until January 2 of the next
odd-numbered year to add the valuation of such property to the
tax rolls.

As a counterpart to the authorization to add real property to
the tax rolls on January 2 of even-numbered years, the second
paragraph of Minn. St. 1974, § 278.17, subd. 1, directed the as-
sessor to reduce the valuation of real property if a building or
structure was destroyed from any cause. This reduction in as-
sessment under the second paragraph of the statute was intended
to take place only on January 2 of every even-numbered year,
just as the addition of value under the first paragraph was to
be made only on January 2 of even-numbered years.

Petitioner also relies on Minn. St. 273.12, which provides that
the assessor, in estimating and determining the value of lands
for tax purposes, must “consider and give due weight to every
element and factor affecting the market value thereof” and must
give due weight to “lands which are comparable in character,
quality, and location, to the end that all lands similarly located
and improved will be assessed upon a uniform basis and without
discrimination.”

Petitioner asserts that if the assessor fails to reduce the as-
sessed valuation of real property destroyed subsequent to its
initial valuation on January 2, he is not fulfilling his statutory
duty to value lands “upon a uniform basis and without discrimi-
nation” since the factors considered by the assessor as of Janu-
ary 2 in a given year may change during the year. We do not
agree with this reasoning, however, since petitioner’s argument,
if carried to its logical conclusion, would require the continual
revaluation of all real property in order to obtain a completely
accurate and up-to-date assessment.

Certainly, all factors considered by an assessor as of January
2 of a given year are not absolutely fixed for the entire year.
However, the legislature has seen fit to set a single assessment

192 a

date as the most practical and reliable method of valuation of
real property within the state. Since values fluctuate from day
to day, it is essential that a fixed point in time be established,
and that tax assessors and property owners be bound by that
date.

In County of Martin v. Drake, 40 Minn. 137, 138, 41 N. W. 942,
943 (1889), Mr. Justice William Mitchell stated on behalf of this
court:

“* * * All tax laws have to fix upon some particular date in
the year at which to determine the taxability as well as the
ownership and value of property, for purposes of assessment and
taxation. Our revenue laws have fixed this at the 1st of May.
* * * Real estate is assessed according to its value at that date,
and the state has a lien for the tax from that date. Every man
must pay taxes on what he then owns, and at its then value, no
matter how short a time he may have owned it, or how soon
thereafter it is lost. All property, if in being as taxable property
at that date, is liable to taxation for that year at its then value,
although it may only have come into being the day before, and
may be in whole or in part destroyed the day after.”

While some jurisdictions have specifically enacted provisions
allowing tax relief to owners of destroyed property in the year
of destruction,* most jurisdictions assess all real property on
a fixed date for the reasons set forth in 3 Cooley, Taxation (4
ed.), § 1062, p. 2140:

4For example, Arizona and North Dakota provide for reduction in
valuation upon petition or application. See, 13 Ariz. Rev. Stat. § 42-251;
11 N. D. Cent. Code, § 57-23-04.7. Arkansas, Iowa, and South Dakota allow
for revaluation, abatement, or refund of taxes for loss not covered by
insurance, See, 7B Ark. Stat. Ann. § 84-436; 24 Iowa Code Ann. § 445.62
(West); 4S. D. Compiled Laws Ann. § 10-18-2(4). Indiana, California, and
Hawaii provide for such relief only under circumstances where there
is a major regional catastrophe or a certified natural disaster. See, Ind.
Code Ann. § 6-1.1-411 (Burns); Cal. Rev. & Tax. Code § 155.1 (West); 3
Haw. Rev, Stat. § 2344.

ee 193

«“* * * There are some inconveniences and inequalities result-
ing from this, but some regulation of the kind is indispensable.
A force of tax officers cannot be kept employed for the year in
watching the transfers of property, the movements of persons,
and vicissitudes of business, in order to equalize the charges upon
them; periodical assessments, if they produce injustice in one
case, may correct it in the next, and on the whole are likely to
be fair. At any rate, they constitute the best regulation the law
can establish. * * * The legislature must adopt some practicable
system; and this practicable system is found to be the one which
has been indicated. * * * Changes in the ownership of prop-
erty, or in the value after the periods of assessment, cannot be
taken notice of in taxation until the time for a new assessment
has arrived.”

If any change is to be made in the procedure followed in Min-
nesota, as we have interpreted it herein, it must come from the
legislature.

I Petitioner questions the constitutionality of the determina-
tion that a taxpayer is entitled to no reduction in the valuation
of his property due to the destruction of a building thereon, and
cites Minn. Const. art. 10, and the equal protection clause of U. 8.
Const. Amend. XIV.5

The legislature has broad discretion in determining classes
of property for tax purposes. See, e. g., Elwell v. County of Hen-
nepin, 301 Minn, 68, 221 N. W. 2d 538 (1974). Here, however,
the requirement that taxes be uniform on the same class of
subjects is not an issue since no “class” was created by the
legislature by these statutes, only a specified date for the assess-
ment of real property.

5 Art. 10, § 1, of the Minnesota Constitution states in part: “* * * Taxes
shall be uniform upon the same class of subjects * * *.” We have held
that “* * * the standard of protection afforded by the Fourteenth
Amendment is the same as that given by Minn. Const. art. [16], § 1, re-
quiring that taxes be uniform upon the same class of subjects.” General
Mills, Inc. v. Div. of Employment and Security, 224 Minn. 306, 309, 28
N,. W. 2d 847, 849 (1947).

194 ee

Minn. St. 1974, § 278.01, and Minn. St. 1974, § 273.17, subd.
1, uniformly applied to the valuation of all real property upon
a fixed date. Those statutes also uniformly applied to all those
whose property was improved or destroyed during the year suc-
ceeding the date fixed in the statutes. There is no question, as
stated in this opinion, that there are reasonable, rational, and
logical reasons for providing such a uniform date. Therefore,
the legislation is constitutional.

Affirmed.

[|

PHALEN PARK STATE BANK v.
JEAN J. REEVES AND OTHERS.
FCM INSURANCE COMPANY, APPELLANT.

251 N. W. 2d 135.

February 18, 1977—No. 45882.

i

— 195

ee

Meagher, Geer, Markham, Anderson, Adamson, Flaskamp &
Brennan, Mary Jeanne Coyne, and O. C. Adamson II, for appel-
lant.

Thomson, Lovett, Wahlfors & Moran and James L. Wahlfors,
for respondent bank.

Heard before Rogosheske, Peterson, and Yetka, JJ., and con-
sidered and decided by the court en banc.

YETKA, JUSTICE.

This is an action brought by the Phalen Park State Bank (the
bank) against FCM Insurance Company (FCM) to recover
under the mortgage clause contained in a fire insurance policy

issued by FCM to the bank’s mortgagors, Jean J. and William
Reeves (the insureds). The insureds intervened in the action as

196 es

plaintiffs asserting their claim to the insurance proceeds. The
case was tried before a jury February 18, 1975. At the conclusion
of the trial, the court granted the bank’s motion for directed
verdict against FCM, and ordered judgment entered for the
pank, ruling that it was entitled to recover $38,686.33, the full
amount due on the mortgage note. As to the insureds’ claim, the
jury returned a special verdict finding that the fire which de-
stroyed the insured property had been deliberately set at the
instance and request of William Reeves. Both FCM and the
insureds appealed from the judgment and the trial court’s order
denying their motions for new trial. However, the insureds’
appeal has been dismissed by order of this court. As to FCM’s
appeal, we reverse and remand for a new trial.

On August 8, 1971, the insureds executed a mortgage note in
favor of the bank in the amount of $34,000 bearing interest at
the rate of 7 1/2 percent per annum. The note was secured by
a mortgage of the insured premises. Of the proceeds of the loan,
$22,715.06 was disbursed by the bank according to the insureds’
instructions and the balance of $11,284.94 was retained in escrow
to secure the bank against an outstanding real estate tax lien and
an attorneys lien.

The insureds defaulted on the note and consequently the bank
commenced foreclosure proceedings pursuant to Minn. St. c. 580.
The bank purchased the property at the sheriff’s sale on De-
cember 27, 1972, for $38,162.17, the balance then due on the
mortgage note plus foreclosure costs. :

In December 1972 the bank received notice that the fire in-
surance provided by the insureds had been terminated. It notified
the insureds of the termination and demanded that they replace
the insurance. In February 1973 the insureds contacted in-
surance agent Robert Averbeck, who secured a replacement
policy through FCM in the amount of $50,000. The policy was
issued by FCM on February 11, 1973, and delivered to the Reeves
on March 8, 1973. On March 15, 1973, the building on the subject
property was destroyed by fire.

— ee 197

The bank filed its proof of claim July 2, 1978, 5 days after the
insureds’ period of redemption from the foreclosure sale had
expired. The bank presently holds the fee interest in the insured
property.

On appeal FCM contends that the policy was invalidated by
the bank’s failure to disclose the foreclosure of its mortgage at
the time the policy was issued and by the absence of any in-
surable interest in the bank. Alternatively, FCM argues that if
the policy is valid then the bank’s recovery must be reduced by
the amount of the escrow funds retained by it, and that upon pay-
ment of that reduced amount the bank should be directed, in
accordance with the provisions of the mortgage clause, to convey
its fee interest in the insured property to FCM.

IB Averbeck, the agent who arranged the insurance policy,
testified that he called the bank to advise it that a replacement
policy was being issued by FCM and that coverage had been
pound. He did not request any information from the bank. He
further testified that he had made no inquiry of the insureds
regarding the status of the mortgage, that he had written
thousands of policies without ever requesting such information,
and that he had never seen an insurance application form which
requested such information. The insurance application submitted
by the insureds required no such information. Averbeck did
testify that if he had known of the foreclosure, he would not have
placed the insurance.

Similarly, FCM’s vice president stated it was the company’s
policy to decline to insure property under foreclosure. A pro-
perty underwriting supervisor for Aetna Insurance Company
testified that insurers ‘normally refuse to insure such property;
however, he also stated that his company had no systematic way
of detecting the existence of a mortgage foreclosure.

We are unaware of any authority, nor has any been cited, re-
quiring a mortgagee, upon application by its mortgagor for a
policy of fire insurance covering the mortgaged premises, to dis-
close to the insurer the foreclosure of the mortgage. While the

198 Ee

bank’s interest is protected under the policy’s mortgage clause,
it is not the insured and is not required to join in the application,
nor does the policy itself impose any duty of disclosure upon it.
Moreover, the record fails to reveal an intentional withholding
of notice of the foreclosure or other breach of good faith or fair
dealing on the part of the bank. The failure of FCM to discover
the foreclosure must rest entirely on its shoulders for not making
adequate inquiry.

HM While the policy withstands attack on that ground, we
believe that a substantial possibility of its invalidity is raised
with respect to FCM’s contention that the bank lacked an in-
surable interest. While we have not had the occasion to so rule,
most courts apparently hold that an insurable interest may not
be predicated on a contract which is void or unenforceable.1
FCM argues that the bank, by charging interest on the undis-
pursed portion of the proceeds of the mortgage note, exacted a
usurious rate of interest, rendering the note and mortgage void,
Minn. St. 334.08, and therefore lacked an insurable interest.

Our research has not uncovered a decision which involves the
precise issue presented in this case—whether an insurable in-
terest can arise out of a usurious mortgage. However, the de-
cisions we have found which considered the broader issue of
whether an insurable interest can arise out of a void or un-
enforceable contract persuade us that the answer to the question
is that it cannot.

In Cherokee Foundries, Inc. v. Imperial Assur. Co, 188 Tenn.
849, 219 S. W. 2d 208 (1949), the Tennessee Supreme Court held
that a purchaser of real property under an oral contract of sale,
unexecuted at the time of the fire, lacked an insurable interest
because the contract was unenforceable under the statute of
frauds. The court found:

“From the moment Cherokee Foundries applied for this in-

1 See, 4 Appleman, Insurance Law and Practice, § 2125; 3 Couch, Cyc.
of Insurance Law 2d, § 24:4; Annotation, 9 A. L. R. 2d 181; 43 Am. Jur.
2d, Insurance, § 500; 44 C. J. S., Insurance, § 180.

—— 199

surance to the moment of the next day when the parties were
to meet at the bank and complete the transaction, it was a matter
entirely within the whim and caprice of Cherokee Foundries as
to whether it would pay the purchase price and take the property
if the seller elected (a matter, too, entirely subject to its whim)
to let the Cherokee Foundries have the property for the stated
purchase price, or at all. Hither could repudiate the oral agree-
ment with impunity, because of the Statute of Frauds. Their
status remaining the same, they could by mutual agreement just
as easily have postponed the meeting at the bank for the com-
pletion of the transaction to any date less than twelve months
after the Cherokee Foundries applied for this insurance, and
upon the arrival of the day fixed, either party could have repudi-
ated without resulting liability the oral contract upon which the
insured here bases his right to recover the insurance.

“So, whether the insurance policy in question was a policy
coupled with an interest was eventually dependent upon the
whim of either the Cherokee Foundries or the seller. As a matter
of fact, one or both of the parties did elect not to go on with the
contract on the next morning. The deeds, etc, remained un-
executed. The proposed seller collected the insurance which it
carried as the owner of the property partially destroyed by the
fire. It subsequently sold what was left of it to Cherokee Found-
ries under a new agreement.

“On principle, the sound rule seems to be that one whose only
right of purchase is under an oral contract which is unenforce-
able against him or the seller, and who, in fact, either at his own
instance or that of the seller, or both, elected finally to reject the
contract, ought not to be allowed to recover on an insurance
policy for a fire which occurred during the existence of that
status between the parties.” 180 Tenn. 355, 219 S. W. 2d 206.

In the case at bar, if the mortgage was usurious, it could have
been avoided by the insureds at the time the insurance was issued
and, more importantly, at the time of the loss. The Cherokee
Foundries decision implies that an insurable interest may have

200 a

arisen had the oral contract been performed by both parties, and,
indeed, it has been so held. Wainer v. Milford Mutual Fire Ins.
Co. 153 Mass. 335, 26 N. E. 877 (1891). In this case, however,
although the mortgage has been foreclosed, it is not clear to us
that the insureds do not have grounds to set aside the sale. The
claim of usury was preserved to the insureds as against the bank
by the court below.

Moreover, assuming usury could be proved, then the bank’s
loss is not the result of the risk insured against but rather its
own, illegal act. In Cherokee Foundries, the court cited and
adopted the general rule regarding the existence of an insurable
interest as set forth in Harrison v. Fortlage, 161 U. S. 57, 65, 16
S. Ct. 488, 490, 40 L. ed. 616, 619 (1896):

«oe * % Tt is well settled that any person has an insurable in-
terest in property, by the existence of which he will gain an
advantage, or by the destruction of which he will suffer a loss

oR RM

If the mortgage is usurious, it is void, and the bank has no right
to either the interest.accrued or the principal. Midland Loan Fi-
nance Co. v. Lorentz, 209 Minn. 278, 296 N. W. 911 (1941). The
bank thus loses nothing by reason of the destruction of the prop-
erty for it had nothing to which it had an enforceable right.

The issue of insurable interest has also arisen where the pur-
chaser of an automobile has failed to comply with statutory con-
veyancing requirements. In Mackie & Williams Food Stores, Inc.
v. Anchor Cas. Co. 216 F. 2d 317 (8 Cir. 1954), the Circuit Court
of Appeals held, applying Missouri law, that no insurable interest
arose out of a transfer in which the purchaser did not comply
with automobile transfer requirements. Its review of the Mis-
souri decisions reveals that the Missouri Supreme Court views
its motor vehicle act as reflecting the highest concern for the
public welfare in preventing dealing in stolen vehicles, thus re-
quiring strict adherence to the law even in collateral matters such
as insurance. See, also, Reece v. Motors Ins. Corp. 116 F. Supp.
394 (W. D. Okla. 1953).

— 201

Under Minn. St. 334.03, a usurious transaction is void. We be-
lieve that this statute also evinces the highest concern for the
public welfare, thereby further persuading us that an insurable
interest cannot arise out of a usurious mortgage.

The issue of the usurious nature of the mortgage note ap-
parently came to light for the first time when the insureds moved
to intervene. In their complaint in intervention the insureds al-
leged that the mortgage note was usurious and requested that it
be declared void and set aside. The special-term judge, before
whom the motion was made, struck that portion of the complaint,
preserving that claim to the insureds for subsequent, independ-
ent litigation.

At trial FCM was prevented from litigating the issue of usury
as it affected the bank’s insurable interest. In sustaining the
pank’s materiality objection, the trial court apparently felt the
action of the special-term judge precluded the trial of that issue
for any purpose. On appeal the bank argues that the defense of
usury should have been affirmatively pleaded in its answer. Rule
8.08, Rules of Civil Procedure. We disagree with the positions
of both the trial court and the bank.

First, the order of the special-term judge, with respect to the
usury issue, was directed only at the insureds and was intended
to avoid delay in an action that was set for trial within 12 days
of the motion. By its terms it had no effect on the defenses to be
raised by FCM. Second, the existence of an insurable interest
is an element of the bank’s claim, affirmatively alleged by it in
its complaint and specifically denied by FCM in its answer. We
believe that this denial properly raised the issue, Rule 8.02, Rules
of Civil Procedure, and that FCM should have been permitted
to litigate it at trial. For this reason we must reverse and grant
FCM a new trial so that the issue of whether the bank has an in-
surable interest may be determined.

I In the event that the bank prevails on that issue and FCM
is required to indemnify it under the policy, its recovery must
be reduced by the amount of the mortgage proceeds which remain

202 as

in the hands of the bank and which it is not obligated to disburse.

The amount payable to the mortgagee “as his, her, its or their
interest may appear” under the mortgage clause is measured by
the indebtedness which the mortgagor owes under his note and
mortgage. FCM contends that the insureds’ obligation as mort-
gagors was that amount due on the note less the $11,284.94 re-
tained by the bank in the escrow accounts.

In Booker T. Theatre Co. v. Great American Ins. Co. 8369 Mich.
583, 120 N. W. 2d 776 (1963), a mortgage was executed as
security for a loan and the assumption of liability as endorsers
on two notes. The insured-mortgagor’s fire insurance policy con-
tained a mortgage clause. On the date of the fire which destroyed
the mortgaged property the mortgagees had already advanced
the amount of the loan but had not made any payments pursuant
to their liability on the notes. Subsequently, the notes fell due
and the mortgagees satisfied them. Contrary to the insurer’s con-
tention that its liability was limited to the amounts advanced at
the time of the fire, the court held that liability extended to the
subsequent payment of the notes the mortgagees had endorsed.

The above decision was distinguished from First Federal Sav.
| & Loan Assn. of Westfield v. American Equitable Assur. Co. 84

F. Supp. 519 (D. N. J. 1949). In that case the mortgagee made
a loan to the mortgagor in the amount of $16,000, secured by the
mortgage, of which it had advanced $4,500 at the time of the loss
by fire. The mortgagor’s fire policy contained a mortgage clause.
Subsequent to the fire, the mortgagor made another advance of
$5,000. The mortgagee made a claim for the entire damage to
the mortgaged premises of $8,350. The court held, however, that
the insurer’s liability was limited to the amount advanced at the
date of the fire.

Both of these cases involve situations in which the mort-
gagees, on the date of the fire, were essentially in possession of
a portion of the proceeds of the mortgage. Whether an insurer
is entitled to a credit for that reserve, according to those deci-

sions, turns on the nature of the mortgagee’s liability with re-

ee 203

gard to the reserve. In the first case, the court determined that
the mortgagee was under an existing obligation, on the date of
the fire, to pay the notes it had endorsed. In the second case, the
court held that the mortgagee, due to the loss, was not under any
further obligation to make advances under the loan.

Thus, we hold that FCM’s liability as to the $11,284.94, which
the bank apparently still retains, is dependent on the obligation
of the bank, or the lack thereof, to pay it either to the mortgagors
or to the lien claimants. However, it is not clear to us what its
obligations are with respect to that amount. On retrial, should
the bank’s mortgage be held valid, the trial court must determine
what portion of the $11,284.94 still held by the bank should be
used to remove liens from the real \estate to the extent that
those liens can be validly perfected in order to make the title
marketable. The bank may also have a right to other setoffs or
equitable defenses which are not present in this record.

I The final issue raised is whether the bank is obligated to
convey to FCM its fee interest in the subject property pursuant
to the following provision of the insurance policy:

«se %* * TW]henever this company [FCM] shall be liable to a
mortgagee for any sum for loss under this policy for which no
liability exists as to the mortgagor, or owner, and this company
shall elect by itself, or with others, to pay the mortgagee the full
amount secured by such mortgage, then the mortgagee shall as-
sign and transfer to the company his interest, upon such pay-
ment, in the said mortgage together with the note and debts there-
by secured.”

Both parties apparently agree that absent the foreclosure pro-
ceedings, payment to the bank pursuant to the above clause would
have obligated it to transfer the mortgage note to FCM. Thus,
the heart of the issue is whether the foreclosure, the bank’s pur-
chase of the mortgaged property at the foreclosure sale, and the
expiration of the period of redemption should defeat the insurer’s
rights under the above clause.

204 EE

It is apparently the generally accepted rule that a mortgage
clause contemplates the foreclosure of the mortgage and there-
fore, the mortgagee is fully protected throughout the proceed-
ings. See, 5A Appleman, Insurance Law and Practice, § 3403.
See also, 11 Couch, Insurance 2d, § 42:712, which states:

“ck ® + TA] change in the character of interest from that of
mortgagee to that of owner, effected by a sale and purchase on
foreclosure, is not sufficient to defeat the insurance granted the
mortgagee, since it must likewise be considered that the pos-
sibility of such a change was within the contemplation of the
parties when the contract was made.”

In Carlson v. Presbyterian Board of Relief, 67 Minn. 436, 70
N. W. 3 (1897), in the slightly different context of both mort-
gagor and mortgagee claiming insurance proceeds paid on joss
following foreclosure and purchase by mortgagee before expira-
tion of period of redemption, this court embraced the position
outlined in Couch op. cit. supra.

Thus, the bank’s rights are preserved under the above clause
of the policy regardless of the foreclosure proceedings. The
provision also contemplates the subrogation of the insurer to the
rights of the mortgagee under the mortgage. Cf. Sterling Fire
Ins. Co. v. Beffrey, 48 Minn. 9, 50 N. W. 922 (1892). The rights
of the bank at the time of the fire when liability arose under the
policy were: (a) to the payment of mortgage note, or (b) to the
fee interest in the mortgaged premises. In Carlson v. Presby-
terian Board of Relief, 67 Minn. 436, 440, 70 N. W. 8, 4, this court
observed:

“CA mortgagee] after the foreclosure had the same interest
in the dwelling house insured as before * * * . It is wholly im-
material whether the defendant, after the foreclosure, was
technically a purchaser, and not a mortgagee, and that its lien

and claim on. and to the house secured its bid, and not its debt
ee

The purpose and intent of the above clause in the policy clearly

is to allow FCM as insurer to succeed to the rights of the bank
as mortgagee. At the time of the fire those rights included the
fee interest in the mortgaged premises upon failure of the in-
sured to redeem. That event having occurred, upon payment by
FCM to the bank pursuant to the above clause the bank should
convey the fee interest in the mortgaged property to FCM. This
is no more than FCM would have acquired had the fire occurred
under similar circumstances before foreclosure, and FCM had
commenced the foreclosure proceedings.

Thus, on remand it must first be determined whether there
was a valid mortgage. Secondly, if the mortgage is determined
valid because usury does not exist, it must then be determined
what amount of the mortgage proceeds retained by the bank
should be used to remove liens from the property. And, finally,
if payment is to be made by FCM, it will be subrogated to the
bank’s fee interest in the property.

In conclusion, we stress that our holding has resulted from and
is limited to the unique facts and circumstances presented in this
case. We do not intend by this decision to depart from the gener-
al rule in this state that the defense of usury is personal to the
borrower. See, Drew v. Skeena Lumber Co. Ltd. 180 Minn. 358,
230 Ni. W. 819 (1930). Nor do we expect that the subrogation lan-
guage of a standard mortgage clause will always result in a
transfer of the fee interest to the insurer from the mortgagee.
Each case, of course, must stand on its own facts.

Reversed and remanded for a new trial.

Topp, JUSTICE (concurring in part, dissenting in part).

I concur in that portion of the majority opinion which in-
dicates that under the peculiar facts of this case and the existing
contract situation FCM is entitled to subrogation to the rights
of the fee holder and to a conveyance of the real estate title from
the bank. This occurs solely because the contract that the in-
surance company provided to the insureds, in which the bank
was a named party in interest, specifically provided for such a

206

conveyance. We must be careful to note that an insurance com-
pany does not insure the land but only the improvements thereon
and that absent specific contractual language, it has no right to
transfer of title based upon its policy of insurance.

I further agree with that portion of the majority opinion
which indicates, under the facts of this case, that the amount
held in escrow must be offset against the face amount of the
note. The right of offset, of course, being a contractual right of
the bank, must be exercised as a matter of equity.

However, I must respectfully dissent from that portion of the
majority opinion which indicates that there is a possible defense
of usury in this case. If we were to grant to FCM all the rights
of the insureds and presume that all of the evidence that it might
offer would be received and decided in its favor, there still would
not be an issue of usury in this case. The best that could be
established is that a loan was made that created an obligation
by the mortgagors to the bank and that some of the funds were
placed in escrow to guarantee payment of certain obligations.
It must be understood that at that point those funds were no
longer assets of the bank but rather represented assets of the
mortgagors which were being held by the bank and were a
liability of the bank to the mortgagors. An analogous situation
would be if the attorney for the mortgagors at the time of the
making of the mortgage had been designated as the escrow agent
for the funds and the funds were placed in his trust account,
which he happened to maintain in the bank. The funds them-
selves physically would remain with the bank but nobody would
raise the question that there was an issue of usury. The fact that
the funds remained escrowed by the bank does not change the
character of the funds. Since the funds are the property of the
mortgagors, they are obligated to pay interest on these funds.
I would decide as a matter of law that there can be no issue of
usury in this case.

KELLY, JUSTICE (concurring in part, dissenting in part).
I join in the dissent of Mr. Justice Todd.

The bank asserts that usury was not alleged in the pleadings
of FCM and that it should not be permitted now as a defense.
FCM asserts that its answer denying the allegations of the com-
plaint put upon the bank the burden of demonstrating that it had
an insurable interest as a mortgagee. Its next contention is that
if the mortgage was invalid because the loan was usurious, there
‘was no insurable interest. It appears from the briefs and record
before us that FCM did not offer any evidence and does not now
claim that there is any evidence of usury other than the fact that
the bank had only disbursed $22,715.06 and had retained in
escrow the sum of $6,284.94 for the payment of taxes levied
against the property and the additional sum of $5,000.00 to
secure the mortgage lien from an attorneys lien filed against the
mortgaged property in that amount. Thus, if we concede that
the issue of usury was pleaded and that the bank would not have
an insurable interest if the mortgage was based on a usurious
loan, the only question to be resolved in determining if the bank
has an insurable interest is: Under the facts presented, was the
Joan usurious?

There is no claim or showing here that the bank did not act
in good faith in holding funds in escrow. The fact that the bank
did not disburse the tax money might give rise to a cause of
action against it for any interest and penalties accruing to the
tax lien for nonpayment, but not to a cause of action for usury.
The funds held in escrow for taxes belonged to the mortgagors
and were payable on demand, either directly for payment of
taxes or to the mortgagors upon proof of payment of taxes. The
record is not clear as to who was to pay the taxes. Hither of these
events, payment of taxes or discharge of the tax lien, could take
place within less than 30 days. In the meantime, the bank could
not plan on loaning the escrowed funds, set aside as security for
the tax lien, that were payable on demand. The money for the
attorneys lien was put into a savings certificate at interest and
was held in trust for the mortgagors until discharge of the at-

208 Es

torneys lien or payment of the mortgage. It is obvious that it was
for the mortgagors’ benefit that the $5,000: was placed in an in-
terest-bearing account because it might be some time before the
attorneys lien would be settled. Banks are not permitted to pay
interest directly or indirectly on demand deposits. Minn. St.
48.50. In general, demand deposits are those that may be with-
drawn in less than 30 days. Minn. St. 48.51. The funds held in
a savings certificate were thus taken out of the demand deposit
classification. The bank could have insisted on holding the $5,000
in escrow to secure itself against the attorneys lien without
giving the mortgagors the benefit of any interest to be earned
by issuing a savings certificate. Should this favorable treatment
of ia customer be grounds for the loss of all money loaned and
interest earned on a far-fetched theory of usury?

‘The legislature, in connection with funds held in escrow by
savings and loan institutions for installment mortgages, has
apparently determined that monthly payments may be made in
advance for insurance, taxes, assessments, ground rents and
other charges on an estimated basis by mortgagors, as. they
expressly permit it by law without requiring the reduction of
any interest payments. Minn. St. 47.20, subd. 8. Legislative policy
is further disclosed by § 47.20, subd. 8(1), which provides that
certain mortgagees, including state banks and trust companies,
mutual savings banks, and savings and loan associations, which
require mortgagors to pay into an escrow, agency, or similar
account for the payment of taxes or insurance premiums with
respect to a mortgaged one-to-four-family, owner-occupied resi-
dence, pay interest on those accounts. Subdivision 8(3), how-
ever, does not require interest payments on such escrow accounts
if the mortgagor is given the option of using it or continuing to
use it and elects to do so. Interestingly enough, subd. 8(1) also
provides : “The requirement to pay interest shall apply to such ac-
counts created prior to [the effective date of this subdivision] as
well as to accounts created after [this subdivision is effective].”
Thus, the legislature indicates by this law that it is aware of the

practice of banks and other financial institutions using escrow
accounts for the payment of taxes and other charges. It appar-
ently has given its blessing to this practice without requiring
payment of interest on certain funds in escrow accounts securing
mortgages on business property, such as is involved in this case.

We would do no favors for the borrowing public in the long
run by finding usury, because lending institutions either would
not make loans in cases such as the one involved here, ‘or would
insist on a title insurance policy or that funds be put in escrow
with a third party. These alternatives, in all probability, would
be more cumbersome and more expensive for the borrower.

I recognize that the majority opinion remands the issue of
usury and does not decide it. However, FCM has had its day in
court. We have before us all the evidence on which it would base
its claim that the mortgage was invalid because of usury and we
should decide it.

I concur with the majority opinion that if the bank prevails
on the issue of usury, the insurer is to be subrogated to the title
of the mortgagee.

I also agree that the funds held in escrow should be deducted
from the bank’s recovery on the insurance policy because equity
requires that be done. Fundamental fairness dictates that the
subrogation clause should permit FCM, after it pays off the
mortgage loan on a loss accruing before the redemption period
has expired, to acquire the bank’s rights growing out of that loan
including any funds held in escrow to perfect the title. Thus,
those funds should be assigned by the bank to FCM or deducted
from the amount to be paid.

Otis, JUSTICE (concurring in part, dissenting in part).

I join in the opinions of Mr. Justice Todd and Mr. Justice
Kelly.

PETERSON, JUSTICE (concurring in part, dissenting in part).

I join in the opinions of Mr. Justice Todd and Mr. Justice
Kelly.

210 es
IN RE WELFARE OF MELISSA ANN LARSON.
LUTHERAN SOCIAL SERVICES AND
ANOTHER v. L. GEORGE STONER.

251 N. W. 2d 325.

February 18, 1977—Nos. 46524, 46743.

William R. Kennedy, Hennepin County Public Defender, and é
Catherine L. Anderson, Assistant Hennepin County Public De-
fender, for appellant mother.

a 211

James D. Kempf, for appellant Lutheran Social Services.

James R. Benneti, for respondent father.

Heard before Todd, MacLaughlin, and Yetka, JJ., and con-
sidered and decided by the court en banc.

YETKA, JUSTICE.

These appeals arise out of a dispute as to the custody of
Melissa Ann Larson, a child born out of wedlock to appellant Eva
Lyn Larson on May 17, 1975, and fathered by respondent L.
George Stoner. Appellant Lutheran Social Services filed a peti-
tion for termination of parental rights. Appellants separately
appealed from an order of the district court terminating the
rights of Ms. Larson and transferring the guardianship and legal
custody of the child to Mr. Stoner. We affirm in part and reverse
in part.

The issues raised are the following:

(1) Whether Lutheran Social Services has standing to appeal
the termination of Ms. Larson’s parental rights after one of its
agents, on its behalf, petitioned for the termination of her rights
and the order appealed from granted relief consistent with that
petition.

(2) Whether the trial court abused its discretion in terminat-
ing Ms. Larson’s parental rights.

(3) Whether the trial court abused its discretion in failing
to terminate the parental rights of Mr. Stoner, the father of the
illegitimate child, and in awarding him custody of Melissa.

The conception of the child took place during a time of marital
infidelity for Mr. Stoner, then 38 years old. Following his mar-
riage in Florida in March 1973 to his present wife Joyce, who
was also 38 years old, Mr. and Mrs. Stoner moved to a farm near
Danvers, Minnesota. This was Mr. Stoner’s second marriage and
Mrs. Stoner’s fourth marriage. In the spring of 1974 they began
to disagree over their respective marital roles. Division of labor
on the farm and the degree of personal freedom allowed Mrs.
Stoner were the two principal subjects of disagreement. During

212 a

this time Mrs. Stoner left Minnesota to stay for several days with
her sister in Illinois, but did not attempt a separation.

Both Mr. and Mrs. Stoner were admitted to hospitals for
mental health care during this period. Mr. Stoner entered Will-
mar State Hospital in July 1974 for a day and a half as a, volun-
tary patient because of “nerves” associated with the marital
problems he was having with his wife, but did not receive any
medication, treatment, or diagnosis. The hospitalization ap-
parently was an attempt to remove himself from conflict, to rest,
and to reflect on the situation from within a different environ-
ment.

It was at Willmar State Hospital that Mr. Stoner met Ms. Lar-
son, another patient. Ms. Larson, who was unmarried and 23
years old, had entered the hospital on July 3 and was being treat-
ed for a “chemical make-up deficiency.” She had been hospi-
talized once before for the same reason for 3 weeks at Glenwood
Hills Hospital in 1971. After spending a day and a half at the
hospital, Mr. Stoner checked out and took Ms. Larson back to
the farm where they stayed overnight while Mrs. Stoner was
away.

In the middle of July, the Stoners separated after a brief trip
to Texas together failed to result in a reconciliation. Mrs. Stoner
moved to Florida and Mr. Stoner returned to the farm in Minne-
sota.

Upon his return, Mr. Stoner went to Willmar State Hospital
for a half day, but did not receive any treatment. He picked up
Ms. Larson and signed out of the hospital.

The ensuing intimate relationship between Mr. Stoner and Ms.
Larson lasted about 5 months. After a brief visit to Mr. Stoner’s
brother in Illinois, the couple moved back to the Stoner farm
where they lived until November 1974. At that time Mr. Stoner
sought a reconciliation with his wife and, accompanied by Ms.
Larson, went to Florida. Mrs. Stoner was aware Ms. Larson had
accompanied Mr. Stoner and, although she did not see Ms. Larson

| 213

during that time, understood that her husband and Ms. Larson
were living together.

On December 31, 1974, Mr. and Mrs. Stoner reconciled their
marital differences. The next day Ms. Larson left Florida by bus
and returned to her parent’s home in Clinton, Minnesota. Mr.
and Mrs. Stoner left several weeks later and returned to their
farm.

Ms. Larson made her first contact with appellant Lutheran
Social Services on March 10, 1975. Her pregnancy was confirmed
the next day when she visited a doctor in Minneapolis. She did
not try to contact Mr. Stoner, who knew of the possible preg-
nancy several months earlier. After the initial screening, Ms.
Larson met with Elsa Skogerboe, a social worker and employee
of Lutheran Social Services, on March 17. Ms. Skogerboe became
“primarily responsible” for Ms. Larson’s care and later became
the petitioner in the termination proceedings. Working as an
intermediary, Ms. Skogerboe wrote to Mr. Stoner on April 4 ex-
plaining that Ms. Larson was making plans to place her child
for adoption and requesting that he arrange to sign the neces-
sary consent forms. She further informed him if he did not re-
spond they would proceed with termination proceedings. Mr.
Stoner wrote to Ms. Larson in care of Ms. Skogerboe during the
first week in May. The contents of the letter, however, were not
introduced into evidence. Ms. Skogerboe wrote to Mr. Stoner
again on May 15, 1975, on behalf of Ms. Larson and requested
a meeting to talk about plans for the child.

On May 17, 1975, Melissa was born. Her birth certificate did
not name her father. On May 21 and again on May 28, Mr. Stoner
called Ms. Skogerboe to inquire, in general terms, about possible
plans for Melissa. In response, Ms. Skogerboe arranged a meet-
ing for June 2 between Ms. Larson and Mr. Stoner. Mr. Stoner
did not keep the appointment.

On June 4, 1975, Ms. Skogerboe, acting as an agent of Luther-
an Social Services, petitioned Hennepin County District Court,

214 —

Juvenile Division,! for a termination of parental rights, alleging
that Melissa was illegitimate and that Ms. Larson could not pro-
vide a home for her and was unable to assume responsibility for
the child’s care. The petition, which did not list Mr. Stoner as
the father, further alleged that these facts established the first
of six possible grounds for termination of parental rights under
Minn. St. 260.221—namely, “written consent of parents who for
good cause desire to terminate their parental rights.”? A hearing
date was set for June 19.

1See, Minn. St. 260.225 (Venue for termination proceedings).

2 Minn. St. 260.221 provides: “The juvenile court may, upon petition,
terminate all rights of parents to a child in the following cases:

“(a) With the written consent of parents who for good cause desire
to terminate their parental rights; or

“(b) If it finds that one or more of the following conditions exist:

“(1) That the parents have abandoned the child; or

“(2) That the parents have substantially and continuously or re-
peatedly refused to give the child necessary parental care and protec-
tion; or

“(3) That, although the parents are financially able, they have sub-
stantially and continuously neglected to provide the child with neces-
sary subsistence, education, or other care necessary for his physical or
mental health or morals or have neglected to pay for such subsis-
tence, education or other care when legal custody is lodged with others;
or

“(4) That the parents are unfit by reason of debauchery, intoxica-
tion or habitual use of narcotic drugs, or repeated lewd and lascivious
behavior, or other conduct found by the court to be likely to be detri-
mental to the physical or mental health or morals of the child; or

“(5) That following upon a determination of neglect or dependency,
reasonable efforts, under the direction of the court, have failed to cor-
rect the conditions leading to the determination; or

“(6) That in the case of an illegitimate child the person is not en-
titled to notice of an adoption hearing under section 259.26 and either
the person has not filed a notice of his intention to retain parental
rights under section 259.261 or that such notice has been successfully
challenged.”

Although the statute uses the term “parents,” this court has inter-
preted it to allow one parent to initiate the filing of the petition (In re

— 215

At the hearing on June 19, both Mr. and Mrs. Stoner appeared
as interested parties and the matter was continued until July 18,
at which time the court entertained a request from Ms. Skoger-
boe for a custody report on Mr. and Mrs. Stoner by the Swift
County Welfare Department.

On July 25 Mr. Stoner executed an acknowledgment of
paternity pursuant to Minn. St. 259.261.

Welfare of Zink, 264 Minn. 500, 504, 119 N. W. 2d 781, 7384 [1963]) and
to permit termination of the rights of only one parent (In re Petition
of Zerby, 280 Minn. 514, 516, 160 N. W. 2d 255, 257 [1968]).

8 Minn. St. 259.261 provides: “Subdivision 1. Any person not entitled
to notice under section 259.26, shall lose his parental rights and not be
entitled to notice at termination, adoption, or other proceedings affect-
ing the child, unless within 90 days of the child’s birth or within 60 days
of the child’s placement with prospective adoptive parents, whichever
is sooner, that person gives to the division of vital statistics of the Min-
nesota department of health an affidavit stating his intention to retain
parental rights.

“Subd. 2. Such affidavit shall contain the claimant’s name and ad-
dress, the name and the last known address of the other parent of the
child and the month and the year of the birth of the child, if known.

“Subd. 3. Upon receipt of the aforementioned affidavit the division
of vital statistics of the Minnesota department of health shall notify the
other parent of same within seven days. This notice to the parent shall
constitute conclusive evidence of parenthood for the purposes of this
statute, unless within 60 days of its receipt, either the notified parent
or some other interested petitioner denies that claimant is the parent of
the child and files a petition pursuant to chapter 260 to challenge such
notice of parenthood.”

This section was added in response to the United States Supreme
Court’s decision in Stanley v. Illinois, 405 U. S. 645, 92 S. Ct. 1208, 31 L.
ed. 2d 551 (1972), wherein that court struck down an Illinois statute
which provided that illegitimate children were declared wards of the
state upon the death of their mother without any hearing on the
parental fitness of the unwed father. While the facts of Stanley in-
volved a father who had lived with the mother in a de facto marriage
for 18 years before her death, and who had custody of and had lived
with the children of this “marriage” intermittently throughout the 18
years, it was unclear whether the decision required a similar notice of
a hearing under any of the instances enumerated in Minn. St. 259.26,

216 ee

The custody report was received August 4, and on August 7
the termination hearing took place. In addition to the facts al-
ready recited, the principal evidence received was the custody
report, which was favorable to Mr. and Mrs. Stoner. In addition
to this evidence, Ms. Larson testified under cross-examination
as to her intent to give the child up for adoption. Based on this
evidence the court terminated the parental rights of Ms. Larson
and ordered custody of the child transferred to Mr. Stoner.

Lutheran Social Services, however, failed to transfer custody
of the child to Mr. Stoner, whereupon Mr. Stoner petitioned for
a writ of habeas corpus. At the same time Lutheran Social
Services and Ms, Larson brought a motion for amended findings
or, in the alternative, for a new trial, arguing that Ms. Larson
had not consented to the termination. The motions were heard
together, and thereafter the court issued a further order which
affirmed his previous order.

Hl One of Lutheran Social Services’ agents, Elsa Skogerboe,
is the petitioner and one of its attorneys appeared at the termi-
nation proceedings. Only when the court failed to terminate the
rights of Mr. Stoner in addition to terminating the rights of Ms.
Larson did Lutheran Social Services begin to question the
validity of its own petition.

On appeal Lutheran Social Services challenges not only the
granting of custody to Mr. Stoner but also the termination of
Ms. Larson’s rights, and, thus, the validity of their own peti-
tion. Fundamental principles of estoppel, however, prevent them
from so doing. See, 6B Dunnell, Dig. (3 Rev. ed.) § 3218, and
cases cited under footnote 98. Cf. Watson v. Watson, 238 Minn.
403, 57 N. W. 2d 691 (1953) ; Kenning v. Reichel, 148 Minn. 433,

subd. 3(a) to (e). In response, notice to a father who has filed an
acknowledgment of paternity pursuant to Minn. St. 259.261 was pro-
vided for in § 259.26, subd. 3(f). For a general discussion of the rights
of an illegitimate father pre-Stanley, see, Note, 50 Minn. L. Rev. 1071
(1966).

Es 217

435, 182 N. W. 517, 518 (1921). See, generally, 28 Am. Jur. 24
Estoppel, §§ 68 to 75; 81 C. J. S., Estoppel, §§ 116 to 118.4

In Behrens v. Kruse, 121 Minn. 90, 98, 140 N. W. 339, 343
(1918), this court stated:

«cx & * No principle is better settled than that litigants cannot
be permitted either to assume inconsistent positions during the
progress of litigation or to shift their claims or the facts at their
pleasure. This is especially true if such would result to the preju-
dice of the party who has acquiesced in the position formerly
taken. Tozer v. Ocean Accident & Guaranty Corp. 94 Minn. 478,
484, 485, 103 N. W. 509. This is merely an application of the doc-
trine of estoppel.”

4 We feel compelled to comment on the procedure and documents uti-
lized by Lutheran Social Services in these proceedings. The form used
as a petitioner for termination of parental rights in this case is set out
in full as an appendix following this opinion.

The petition asserts wnder oath that the parents have consented in
writing to the termination proceedings. In fact, no such consent was
introduced at the hearing. Furthermore, Lutheran Social Services now
denies such consent was ever obtained. Secondly, the father’s name and
address were omitted although known to Lutheran Social Services at
the time of the petition. While we accept the explanation of counsel at
oral argument that the persons executing the petition were not lawyers
and that as a practice consent is not obtained in advance of hearing for
fear that the claim will be made that the consent was obtained under
duress, it would be better practice either to obtain the consents or to
state specifically that they have not been obtained. The parties and the
court are entitled to rely on statements made under oath as part of the
record. Therefore, in the future we trust petitioners in termination pro-
ceedings will not state in their petitions that consents of the parents
have been obtained when, in fact, they have not, and will not omit a
parent’s name and address when, in fact, these are known. The poten-
tial for abuse is well illustrated in this case where the petitioner did
not list the name of the father in the petition and yet now claims he
should not be allowed to contest the termination of his rights because
his name did not appear on the birth certificate and his acknowledg-
ment of paternity was made too late to satisfy the requirements of
Minn. St. 259.261.

218 a

And, in Tozer v. Ocean Accident & Guaranty Corp. 94 Minn. 478,
485, 103 N. W. 509, 511 (1905), this court quoting from Davis
v. Wakelee, 156 U. 8. 680, 15 S. Ct. 555, 39 L. ed. 578 (1895),
said:

«# « * Tt may be laid down as a general proposition that
where a party assumes a certain position in a legal proceeding,
and succeeds in maintaining that position, he may not thereafter,
simply because his interests have changed, assume a contrary
position, especially if it be to the prejudice of the party who has
acquiesced in the position formerly taken by him.’ ”

HE With regard to the termination of the parental rights of
Ms. Larson, however, we should point out that although she did
not object to termination for purposes of adoption, she did ex-
press objection at the hearing. when she first understood the
court was considering the possibility of awarding custody to Mr.
Stoner. The record is not clear that she was ever made aware of
that possibility until the hearing itself. Thus, while Lutheran
Social Services does not have standing to appeal the order termi-
nating her rights, Ms. Larson does have such standing. Because
of our doubt that she was ever made aware of the possible ramifi-
cations of the petition and because there is no written consent
executed by her in the record, we find that there was no evidence
for the trial court to terminate her parental rights and the dis-
trict. court is reversed on that portion of its order. Nor does the
evidence support termination on any other statutory ground. The
trial court stated in its original findings:

“The mother is primarily interested in providing a two parent
home for the child, commendably recognizing that she cannot
provide this herself; thus she substantially declines to provide
parental care, as alleged in the Petition and enounced in the stat-
ute.” (Italics supplied.)

And also said in its amended findings:

. “The mother gave the child up for adoptive placement, fully
indicating that she did not consider herself ready, willing or able

— 219

+o provide proper parental care during the child’s minority,
changing her mind in this regard only when it became apparent
that the natural father might obtain custody in her stead.

“The natural mother has not proferred any plan or arrange-
ment by which she herself would provide parental care for the
child, but rather insists that the child must go to adoptive place-
ment with strangers.”

However, neither of these findings is a clear and specific find-
ing under the statute that the mother either abandoned the chiid
or that she had “substantially and continuously or repeatedly
refused to give the child necessary parental care and protection.”
See, In re Petition of Zerby, 280 Minn. 514, 160 N. W. 2d 255
(1968). The latter would be the only other statutory basis which
would have relevancy here.

B_ On the remaining issue, we find no abuse of discretion on
the part of the trial court in failing to terminate the parental
rights of Mr. Stoner and awarding him custody. Appellants
argue Mr. Stoner’s parental rights should have been terminated
automatically because his name did not appear on the birth cer-
tificate of the illegitimate child and his acknowledgment of pa-
ternity was defectively filed.

This argument is rejected for several reasons. First, Mr. Ston-
er’s affidavit of paternity was not defective. Lutheran Social
Services vigorously argued that the affidavit, although executed
on July 25, was not filed until August 4, 1975, and thus did not
satisfy the 90-day requirement contained in Minn. St. 259.261.
An examination of the birth certificate, however, reveals, con-
trary to appellants’ assertion that the child was born on May 7,
that the child was born on May 17, 1975. Thus, even assuming
the document was not received by the division of vital statistics
of the Minnesota Department of Health until August 4, the 90-
day filing requirement was met. Moreover, this court has held
on numerous occasions that the burden of proof in termination

220. es

proceedings lies with the petitioner.® Even assuming the filing
had been beyond the 90-day limit, the petitioner failed to intro-
duce competent evidence the acknowledgment was not received
within the time allowed. Although no case has yet arisen on this
specific issue, no reason appears to depart from the general rule
in this instance.

Secondly, Mr. Stoner’s appearance at the hearing and his ver-
pal acknowledgment of his paternity afforded him the right to
have his proposals for the welfare of the child considered by the
court along with any other plan or proposal urged by the mother,
any child welfare agencies, or interested parties. In re Welfare
of Zink, 264 Minn. 500, 119 N. W. 2d 731 (1963). Thus, the trial
court properly considered the plans offered by Mr. Stoner for
the welfare of Melissa.

In assessing sufficiency-of-the-evidence claims the applicable
test is well-settled. In Molto v. Molto, 242 Minn. 112, 114, 64
N. W. 2d 154, 156 (1954), this court stated:

«*« * * [T]he trial court is vested with broad discretionary
powers and in the absence of a showing of arbitrary action in
awarding custody of a child, this court will not interfere. It
should be kept in mind that a trial court, unlike an appellate
court, has the opportunity to see the parties as well as their wit-
nesses, hear their testimony, observe their actions, and weigh
the evidence in the light of those factors. In the absence of a clear
abuse of discretion the action of the trial court must be af-
firmed.”

In regard to the possible termination of Mr. Stoner’s parental
rights the court found:

«# * * The father’s lifestyle is unusual, but it has not been
demonstrated that it is beyond the community’s moral pale, nor
has it been demonstrated that his lifestyle will in the foreseeable

5E. g., In re Welfare of Barron, 268 Minn. 48, 53, 127 N. W. 2d 702, 706
(1964).

a 221

future provide less than minimal standards of parental care for
the child.”
And further:

«* %* * The child being illegitimate, the rights of the father
are paramount to all the world except the mother’s, and under
present legal and sociological trends may well be equal to the
mother’s: Both committed the same sin, if sin it be.”

‘The facts as previously recited, as well as the custody report of
the Swift County Welfare Department, supply sufficient support
for these findings.

Rights of custody, of course, must always be subordinated to
the best interests and welfare of the child.* With this qualifica-
tion, however, this court has stated (In re Welfare of Zink, 269
Minn. 535, 540, 182 N. W. 2d 795, 798):

«* * * The general rule which we follow is that an award of
custody of an illegitimate child to the admitted father as against
the claims of relatives and welfare agencies may be approved
under circumstances where the mother rejects the child and the
putative father is competent to care for and suitable to take
charge of the child * * *.”

The custody report, the principal evidence entered at the termi-
nation hearing, reflected favorably on the ability of Mr. and Mrs.
Stoner to care for the child. Under the facts of this case, follow-
ing the recommendations of that report does not amount to an
abuse of discretion. This court has previously noted that the
recommendations of public welfare departments are to be accord-
ed great weight by the district court.7

See, In re Welfare of Shady, 264 Minn. 222, 229, 118 N. W. 2d 449, 454
(1962); In re Adoption of Jaren, 223 Minn. 561, 569, 27 N. W. 2d 656, 661
(1947).

7 See, In re Petition of Alsdurf, 270 Minn. 236, 239, note 3, 183 N. W.
2d 479, 481 (1965), citing In re Adoption of Zavasky, 241 Minn. 447, 453,
63 N. W. 2d 573, 577 (1954).

222 ee

The order of the trial court terminating the parental rights
of the mother are reversed. Its order refusing to terminate the
rights of the natural father and awarding him custody are af-
firmed.

APPENDIX
PETITION FOR TERMINATION
OF PARENTAL RIGHTS

STATE OF MINNESOTA DISTRICT COURT—

JUVENILE DIVISION

County of Hennepin Fourth Judicial District

File No. 86058
In the matter of the welfare of
Melissa Ann Larson, Child.

Petitioner, being duly sworn, on information and belief, alleges
and states that:

1. The following facts are true as to the Child or Children
named above:

a. Said child is illegitimate.

b. Mother cannot provide a home for the child and is unable

to assume responsibility for the child’s care.

2. Such facts prove the following grounds of termination of
parental rights under Statute 260.221.

(X) Parents for good cause consent in writing.

( ) Abandonment by parents.

Parental care continuously refused.

Basic needs. of child continuously refused.
Parents unfit due to seriously harmful conduct.
Previous neglect uncorrected despite help.

8. The following are the names, dates of birth, residences, and
post office addresses of the Child or Children, the names, races,
religious preferences, residences, and post office addresses of
the parents, and the names, residences, and post office addresses

AAAA
werr

Es 223
of any guardians or legal custodians or nearest relatives, and
spouses of the Child or Children. Melissa Ann Larson, 5-17-75,
5256—Girard Ave. North, Minneapolis, Minnesota. Mother: Eva
Lyn Larson, white, religious preference Lutheran, R.R. 1, Clin-
ton, Minnesota.

WHEREFORE Petitioner calls upon the Court to inquire into
the foregoing and, if proven according to law, to terminate, for-
ever, any and all rights which the parents have to the Child or
Children, to place the Child or Children under appropriate guard-
ianship beyond the control or influence of the parents for pos-
sible adoption without the knowledge or consent of the parents.

JUVENILE COURT HEARING scheduled for June 19 at 3:30
p.m. at 1000 South Sixth Street, Minneapolis.

Filed 6-4-75 Petitioner’s Signature
Clerk of Dist. Ct., Henn. Co. ELSA SKOGERBOE
MARGARET NELSON

Deputy

Sworn to before me on information and belief this 4 day of
June, 1975.— Laverne Anderson, Notary Public, Hennepin
County, Minnesota. My commission expires Aug. 6, 1975.

WALTER J. FLECK AND OTHERS v.
WARREN SPANNAUS AND OTHERS.

251 N. W. 2d 334.
February 18, 1977—No. 47086.

Briggs & Morgan, John R. Kenefick, Maurice J. McCarthy,
Frankel, McKay, Orlikoff, Denten & Kostner, for plaintiffs.

Warren Spannaus, Attorney General, Richard B. Allyn, Solici-
tor General, Kent G. Harbison and Richard A. Lockridge, Special
Assistant Attorneys General, for defendants.

YETKA, JUSTICE.

This case was certified to this court by the United States
District Court for the District of Minnesota pursuant to Minn.
St. 480.061. By an order dated August 5, 1976, the Federal
Court requested a resolution of the following three issues:

“(1) Upon what date did the Minnesota Private Pension
Benefits Protection Act, Minn. Stat. § 181B.01 et seg. (1974)
(hereinafter the ‘Minnesota Pension Act’) become null and void
pursuant to Minn. Stat. § 181B.17?

“(2) What effect does the termination of the Minnesota
Pension Act have upon any cause of action which may have
accrued prior to the date of such termination but upon which no
administrative proceeding had been commenced?

“(3) What effect does the termination of the Minnesota
Pension Act have upon any cause of action which was the subject
of a pending administrative proceeding on the date of the termi-
nation of the Act?” :

The plaintiff Allied Structural Steel Company (Allied) is

1 Section 480.061 is the Uniform Certification of Questions of Law Act.
For a general discussion of Federal court certification of questions of
state law, see, Lillich & Mundy, Federal Court Certification of Doubtful
State Law Questions, 18 U.C.L.A. L. Rev. 888.

— 225
a Delaware corporation having its principal place of business
in Illinois.? It is in the business of fabricating and erecting
structural steel, both for intrastate and interstate commerce. For
many years Allied maintained a division office within the State
of Minnesota. The duty of this office was to oversee the erection
and general construction of steel buildings and bridges located
in at least 30 states.

On August 7, 1968, Allied organized the Allied Structural
Steel Company Salaried Employees’ Pension Plan (Pension
Plan). The Pension Plan was for the benefit of salaried employ-
ees and qualified as a single-employer plan under § 401 of the
Internal Revenue Code of 1954, 26 USCA, § 401.? It is not a
union plan and none of its participants are union employees. The
Pension Plan is administered within the state of Illinois and uses
as its depository the Northern Trust Company in Chicago, which
is also the trustee for the plan.

Under the plan a salaried employee is entitled to full vesting
of his pension for early retirement purposes (1) if the employee
is at least 60 years old and has worked 15 continuous years; or
(2) if the employee is at least 55 and the total of his age and
years of continuous service equals 75; or (3) if the employee is
less than 55, and the total of his age and years of continuous
service equals 80.

In 1974, the Minnesota Legislature passed the Private Pension
Benefits Protection Act (Act). L. 1974, c. 437. Now codified as
Minn. St. c. 181B, the Act took effect April 10, 1974, the day

2The complaint included three other plaintiffs, Walter J. Fleck, a
salaried employee of Allied; Hdyth A. Hamler, also a salaried employee
of Allied, and BE. A. Richert, fiduciary of Allied’s pension plan. The
three-judge court held these individuals lacked standing to challenge
the enforceability and constitutionality of the Minnesota Act and there-
fore dismissed their claims.

8 Under 26 USCA, § 401, a plan qualifies for favorable tax treatment
if it meets certain coverage provisions, one of which requires the inclu-
sion in the plan of a minimum percentage of the total number of em-
ployees,

226 ee

after its enactment. With certain exceptions not raised here,*+
the Act imposes a “pension funding charge” against employers
who cease to operate a place of employment or a pension plan
within the state on or after April 10, 1974 in a manner which
results in the forfeiture of employee pension benefits. The
pension funding charge is the present value of the vested and
nonvested benefits described in the statutory provisions. These
statutes essentially provide that upon termination of the opera-
tion of a pension plan or place of employment any employee who
has completed at least 10: years of covered service under a
pension plan has an automatically vested right to all pension
benefits he would have received had the particular. plan not
been terminated or had the place of business not been closed.

The Act also requires an employer to give prior notice to the
commissioner of labor and industry if he intends to cease opera-
tions.* Upon receipt of the notice, the commissioner is required
to investigate to determine the amount of any pension funding
charge due and certify the amounts owing by an employer.” The
amount certified becomes a lien upon the employer’s assets.* The .
pension funding charge is to be used to purchase an annuity
payable to the employee when he reaches normal retirement
age.®

In the summer of 1974 Allied began to terminate its division
construction office in Minnesota. It discharged 11 of its 30
salaried employees in the state on July 31, 1974. Additional
employees have been terminated since that date for various
reasons,1°

Pursuant to § 181B.08 of the Act, Allied notified the Depart-

4 See, Minn. St. 181B.07.

5 Minn. St. 181B.03 to 181B.06.
6 Minn. St. 181B.08.

7 Minn. St. 181B.09 to 181B.11.
8 Minn. St. 181B.11. re
9 Minn. St. 181B.12. .
10 The Minnesota office finally was closed in February 1975.

a 227

ment of Labor and Industry on August 7, 1974, of its intent to
terminate its Minnesota division and that some employees al-
ready had been terminated. Upon receipt of the notice of termi-
nation the commissioner of Jabor and industry and the adminis-
trator of the pension protection division of the Department of
Labor and Industry began an investigation of the closing of
Allied’s Minnesota division and its effect on the pension benefits
of the terminated employees.

On September 2, 1974, during the investigation, the Federal
Employee Retirement Income Security Act of 1974 (ERISA) was
enacted.11 As finally enacted and codified in 29 USCA, § 1001
et seq., ERISA provides a comprehensive scheme of both tax and
labor provisions designed to remedy inequities in the area of
private pension plans. See, generally, Snyder, Hmployee Retire-
ment Income Security Act of 1974, 11 Wake Forest L. Rev. 219;
Note, 26 Syracuse L. Rev. 539.

In December 1974, this action was begun by Allied, two sala-
ried employees of Allied, one with vested rights under the
Pension Plan, and the fiduciary of the Pension Plan. It was filed
in Federal District Court for the Northern District of Ilinois
against the Minnesota Attorney General, the Minnesota Commis-
sioner of the Department of Labor and Industry, and the Ad-
ministrator of the Minnesota Private Pension Benefits Protec-
tion Act. The plaintiffs sought an injunction against the enforce-
ment of the Act; a clarification of the obligations under the
terms of the Pension Plan, ERISA, and the Federal tax laws;
a declaration that the Act was unenforceable; and the convening
of a three-judge court pursuant to 28 USCA, § 2284. The com-
plaint alleged the Act was invalid because ERISA preempted the
area, the Act became null and void by its own terms upon the
enactment of ERISA, and because the Act violated numerous
provisions of the United States Constitution, including the con-

11 Pub. L. No. 93-406, 88 Stat. 882.

228 Es

tract clause.1? The action was transferred on a venue ruling to
Federal District Court for the District of Minnesota.
On August 18, 1975, the Minnesota Commissioner of the De-

12U.S. Const. Art. I, § 10, provides, in part: “No state shall * * * pass
any * * * law impairing the obligation of contracts * * *.” The Minne-
sota Constitution contains a similar provision. Minn. Const. art. I, § 11.

The complaint alleged: “(a) The Federal Statute (ERISA) has pre-
empted the field.

“(b) The Minnesota Act is an unreasonable regulation of Interstate
Commerce in violation of Article I, Section 8 of the Constitution of the
United States.

“(c) The Minnesota Act impairs the obligations of an existing con-
tract between Plaintiff Allied and its employees, in violation of Article
I, Section 10 of the Constitution of the United States.

“(d) The Minnesota Act deprives Plaintiff Allied of its property
without due process of law in violation of Amendment XIV, Section 1
of the Constitution of the United States.

“(e) The Minnesota Act contains the following provision:

“Sec. 17. Effective date; effect of federal act in area.

Sections 181B.01 to 181B.17 shall take effect the day following final
passage. Provided that sections 181B.01 to 181B.17 shall become null
and void upon the institution of a mandatory plan of termination in-
surance guaranteeing the payment of a substantial portion of an
employee’s vested pension benefits pursuant to any law of the United
States.’

Upon the enactment of ERISA the Minnesota Act became null and
void by its own terms.

“(f) The Minnesota Act is vague and indefinite and uncertain.

“(g) The Minnesota Act is substantially unfair to the participants
and beneficiaries of the Pension Plan who are not covered by said Act.

“(h) The Minnesota Act fails to provide notice to the person against
whose assets a lien is to be imposed.

“(i) The Minnesota Act fails to provide a hearing and an oppor-
tunity to defend against the imposition of a lien upon an employer's as-
sets.

“(j) The Minnesota Act does not apply to all employers, but only
to those employers who have established a pension plan. Such a classi-
fication is unreasonable, arbitrary and invidious. The Minnesota Stat-
ute thereby violates Amendment XIV, Section 1 of the Constitution of
the United States.”

Dt 229
partment of Labor and Industry notified Allied of the assessment
of a pension funding charge for 18 employees in the total amount
of $185,751. In response, Allied applied to the Department of
Labor and Industry for a contested case hearing and requested
that the pension funding charge not be assessed pending the
decision of the Federal District Court on the enjoining of the
state administrative proceedings. This request was granted by
the hearing examiner.

In Federal court, before Judge Alsop, the plaintiffs moved for
a preliminary injunction, a summary judgment, and the conven-
ing of a three-judge court, all on the grounds that the Act (1)
was preempted by ERISA; (2) became null and void by its own
terms when ERISA was enacted; and (3) violated numerous
provisions of the Constitution. In Fleck v. Spannaus, 412 F. Supp.
366 (D. Minn. 1976), Judge Alsop held:

(1) ERISA, pursuant to 29 USCA, § 1144, did not preempt
state law until January 1, 1975;

(2) The issue of whether to abstain from a construction of
the termination provision of the Act should be made by a three-
judge court;

(8) <A three-judge court should be convened.

A three-judge court, consisting of Judges Heaney, Devitt, and
Alsop, was convened and plaintiffs moved for a summary judg-
ment enjoining the enforcement of the Act on the grounds that
(1) the Act became null and void by its own terms upon the pas-
sage of ERISA; and (2) the Act violated numerous provisions
of the Federal Constitution. The defendants had moved for ab-
stention to permit this court to construe the Act and, in the al-
ternative, argued the Act was constitutional in all respects. The
three-judge court certified to this court questions of law as to
the effect of the enactment of ERISA on the termination provi-
sions of the ‘Act. In so doing, it noted that a construction of the
Act by this court which would hold that the Act became null and
void on September 2, 1974, and that all accrued and existing

230

causes of action ceased to exist at that time would avoid the
necessity of reaching the constitutional issues raised.

A. Date on Which Minnesota Legislature Intended Minnesota
Private Pension Benefits Protection Act to Terminate.

The first of the three questions certified to this court is the
following: .

“(1) Upon what date did the Minnesota Private Pension
Benefits Protection Act, Minn. Stat. § 181B.01 et seg. (1974)
(hereinafter the ‘Minnesota Pension Act’) become null and void
pursuant to/Minn. Stat. § 181B.17?”

The law which we are asked to interpret is the final section
of the Act, Minn. St. 181B.17, which states:

“Sections 181B.01 to 181B.17 shall take effect the day follow-
ing final passage. Provided that sections 181B.01 to 181B.17 shall
become null and void upon the institution of a mandatory plan
of termination insurance guaranteeing the payment of a substan-
tial portion of an employee’s vested pension benefits pursuant
to any law of the United States.”

This is the first time this court has construed the Act.1? A brief
mention of problems which gave impetus to the recent remedial
legislation in the area of private pension plans might serve as
a helpful preface to a discussion of the Act and ERISA. One
commentator aptly summarized the problems of the private pen-
sion system in these terms:

18 In White Motor Corp. v. Malone, 545 F. 2d 599 (8 Cir.), reversing
412 F. Supp. 372 (D. Minn, 1976), the Court of Appeals for the Highth
Circuit reversed a decision of the Federal District Court for Minnesota
which had held that the Act as applied to White Motor Corporation was
not preempted by the Federal law under the National Labor Relations
Act, The appellate court held that as applied to White Motor the Act
attempted to regulate the terms of a collective bargaining agreement
and thus was preempted by Federal labor law. Because the Allied Pen-
sion Plan is not a union plan, the White Motor decision does not apply
‘to the present case.

Le 231

(1). The problems of coverage. Only about one-half of the
labor force is employed by employers who have established pen-
sion or profit-sharing plans and approximately three-fourths
of those who do work for such employers are actually partici-
pants in the plans operated by those employers.

“(2). The lack of adequate vesting provisions in existing
plans. In many of the existing plans vesting was so long delayed
that there was little chance that an employee would actually re-
ceive a pension unless he remained with the employer until he
reached normal retirement age.

“(3). The lack of adequate funding. Many employers failed
to make contributions that were large enough to fund adequately
their plans, and in the event of early termination even those em-
ployees with vested rights received only a small fraction of the
amount that they might reasonably have anticipated.

“(4). Failure of the employer or the pension trustee to
furnish the employee with adequate information as to his rights
under the plan and as to the financial stability of the trust estab-
lished under the plan.

“(5). The failure of the federal government to protect fully
the rights of employees by adequate regulations. Regulation was
entrusted entirely to the Internal Revenue Service which was
rightly concerned with the tax aspects of the plan and not with
rigid enforcement of the rights of employee participants.” Snyder,
Employee Retirement Income Security Act of 1974, 11 Wake
Forest L. Rev. 219, 226.14

Consideration of early House and Senate versions of what be-
came ERISA preceded the passage of the Minnesota Act. The
first of the five bills which contributed to ERISA was S. 4, re-
ported by the Senate Labor and Public Welfare Committee on
April 18, 1973. See, generally, 1974 U. S. Code Cong. & Ad. News

14 See, also, 1974 U. S. Code Cong. & Ad. News pp. 4639, 4640-4646
(background on major issues of private pension law facing drafters of
ERISA).

232 a

4838. Under this proposal the vesting and funding provisions
would have become effective 8 years after enactment and the
termination insurance provisions 1 year after enactment. Id.
A888. The House version, labeled H. R. 2, was a compromise bill
combining H. R. 2 and H. R. 12855. It was passed on by the
House February 28, 1974. Under H. R. 2, as reported by the
House Education and Labor Committee, both the vesting and
funding requirements would have become effective 2 years after
enactment. Id. 4662. ‘Termination insurance would have applied
to insure unfunded vested liabilities incurred prior to enactment
of the proposal, as well as after its enactment. Id. 4662, 4663. The
Senate passed H. R. 2 on March 4, 1974, with amendments that
generally substituted language from the earlier Senate bill. The
House did not agree to the amendments and a conference com-
mittee was appointed.

‘Thus, when the Minnesota Private Pension Benefits Protection
Act was enacted on April 9, 1974, the final provisions of the Fed-
eral act (and even its passage) were uncertain. The conference
committee had yet to report and final provisions and effective
dates were unknown.

* When it passed the Act, the Minnesota legislature certainly
was aware of the Congressional activity (or lack of it). Viewed
in light of the uncertainty of the date of passage of the Federal
legislation and the similar uncertainty of the final Federal provi-
sions, it is most reasonable to believe the Minnesota legislature
passed the Act in response to the delay in Congressional action.
More important, it is also most reasonable to believe the legisla-
ture intended the Act to provide immediate, full, and lasting pro-
tection for workers—protection which would last until the Fed-
eral act displaced it. To provide the fullest protection the legisla-
ture must have intended the state legislation to remain in effect
as long as possible. If not preempted, this would mean a state
act which would dovetail as closely as practical with the Federal
act: The problem which it was responding to was not of the type
which could be attacked piecemeal, and the need for reform was

as 233

pressing. It cannot be assumed that gaps in overall protection
were intended.

ERISA was signed into law by President Ford on September
2, 1974. The conference report had been passed by the House
August 20, 1974, and the Senate August 22, 1974, 1974 U.S. Code
Cong. & Ad. News p. 4639. ERISA sets forth detailed standards
in the important areas of private pension funding, vesting and
termination insurance, among others.1°

With respect to funding, ERISA requires that. past service
costs be amortized to relieve the hardship created when under-
funded plans terminate. Plans must eliminate unfunded past lia-
bilities and attain fully funded status within a prescribed number
of years. 29 USCA, § 1082. For plans in existence on January
1, 1974 (such as Allied’s), the funding requirements apply to plan
years beginning after December 31, 1975. 29 USCA, § 1086(b).

With regard to vesting, ERISA specifies minimum vesting
and strict participation standards. See, 29 USCA, §§1051 to 1061.
Under ERISA an employee generally cannot be compelled to wait
more than 1 year before participating in his employer’s plan.
However, employees could be compelled to wait until they reach
the age of 25 to participate. 29 USCA, § 1052(a)(1)(A). Three
alternative vesting formulae are provided. First, an employer
can use a graded schedule under which an employee must become
25 percent vested after 5 years; the employee also must receive
an additional 5 percent interest for each of the next 5 years, and
10 percent for each of the final 5 years. 29 USCA, § 1058 (a) (2)
(B). Second, the employer can provide a schedule by which an
employee is 100 percent vested after 10 years of service. 29

15In addition to providing new standards for vesting, funding, and
termination insurance, ERISA also sets fiduciary standards for the
management of plans, 29 USCA, §§ 1101 to 1114; prohibits reduction of
pension benefits based on. increases in social security benefits, 29 USCA,
§ 1056(b) (1, 2); provides for the administration of the law by the Treas-
ury and Labor Departments, 29 USCA, §§1201 to 1242, and further study
of designated pension-related areas, 29 USCA, §§ 1221 to 1232.

234 Es

USCA, § 1058(a)(2)(A). Finally, a “rule of 45” formula pro-
vides that a worker with at least 5 years of service becomes 50
percent vested when the sum of his age and years of service
equals 45; for each of the next 5 years the worker’s account must
be vested in an additional 10 percent. 29 USCA, § 1053(a) (2)
(C). Benefits derived from a worker’s own contributions to the
pension fund are at all times 100 percent vested and nonforfeit-
able. 29 USCA, § 1058(a) (1). These provisions became effective
for Allied no sooner than January 1, 1976. 29 USCA, § 1061
(b) (2). :

Finally, with respect to termination insurance, ERISA estab-
lished the Pension Benefit Guaranty Corporation (PBGC) with-
in the Department of Labor to protect participants from losses
caused by plan terminations. See, 29 USCA, §§ 1301 to 1323.
Plans are required to subscribe to the PBGC by paying per capita
premiums, which may decrease in later years as unfunded liabili-
ties diminish, 29 USCA, § 1306(a). A solvent employer whose
plan terminates may be liable to the PBGC for benefit payments
which it has made, 29 USCA, §§ 1862(b), 1868. The premium
payment provisions for both benefit and contingent liability
coverage became effective September 2, 1974, 29 USCA, § 1881
(a), while benefit payments for previously vested benefits for
single-employer plans which terminated after June 30, 1974 and
before September 2, 1974 were covered provided the plan termi-
nated for a reasonable business purpose and the employer filed
a timely notice with the Secretary of Labor, 29 USCA, § 1381(b).

As applied to the Allied Plan, ERISA would not have “guar-
ante[ed] the payment of a substantial portion of [an Allied] em-
ployee’s vested pension benefits” until at least January 1, 1976,
the earliest date on which all these titles of ERISA could apply
to Allied.

It seems clear to us that the Minnesota Legislature intended
to protect persons employed in Minnesota by vesting rights
which they would otherwise be denied under existing law. The
Act was intended to be effective until Federal laws would sub-

a 235

stantially protect the same rights. Thus, because under the Fed-
eral law (ERISA), the mandatory vesting and funding require-
ments did not apply until plan years beginning after December
31, 1975, our legislature intended Minn. St. 181B.01 to 181B.17
to be effective until those dates and we so hold. We pass only on
the intent of our own state’s legislature at the time of the passage
of the Act.

In any event, the Minnesota statute was effective on July 31,
1974, when Allied terminated 11 employees in connection with
ceasing to operate a place of employment in Minnesota. On that
date, Allied’s employees received mandatory vesting of their pen-
sion rights under Minnesota law, because they did not have vest-
ing under the Allied pension plan itself. There would be little
point in passage of the Act if it did not accomplish what the legis-
lature so obviously intended—protection to pension rights of
Minnesota employees. Thus, as to the first certified question we
hold the Minnesota Act did not become null and void under the
terms of Minn. St. 181B.17 until the funding, vesting, and termi-
nation insurance provisions of ERISA applied.

B. Effect on Pending Causes of Action and Administrative
Proceedings.

The second and third certified questions may be treated to-
gether. They are:

“(2) What effect does the termination of the Minnesota Pen-
sion Act have upon any cause of action which may have accrued
prior to the date of such termination but upon which no adminis-
trative proceeding had been commenced?

“(3) What effect does the termination of the Minnesota Pen-
sion Act have upon any cause of action which was the subject
of a pending administrative proceeding on the date of the termi-
nation of the Act?” .

Allied vigorously contends the “null and void” language of the
Act would render any pending mattérs totally without effect.
Two considerations, however, require an opposite result. First,

236 es

the Act must be construed as a whole and in light of the evil
which it sought to remedy. The drafters of the Act were aware
of ERISA and the provisions it likely would have in its final
form. As already discussed, when the Act was passed both the
United States Senate and House had passed their own versions
of ERISA and the conference committee had yet to recommend
final provisions. The Minnesota Legislature passed the Act with
the knowledge that ERISA was pending, but without knowing
when (and if) it would finally become effective. With this in
mind, it appears clear that what was intended was a continuous
period of coverage. If the Act were not to apply to causes of ac-
tion pending on the date of its termination (or of its preemption
by ERISA), the legislature would have performed a useless act.
An act would have been passed which would have had no ef-
fect.1® We decline to so hold. See, Minn. St. 645.17(2).

Second, the Act did not end by its own terms. Instead, the Act
was preempted. See, 29 USCA, § 1144; Fleck v. Spannaus, 412
F. Supp. 366, 869. For the Act to terminate by its own provision
and thus put the words “null and void” in issue, ERISA must
provide equivalent benefits. As discussed, however, ERISA
would not have provided equivalent benefits until at least Janu-
ary 1, 1976. Thus, the termination provision of the Act did not
come into operation. Rather, the Act was preempted before that
could happen.

Thus, our answer to both the second and third certified ques-
tions is “none.”

16 Moreover, Allied’s reliance on the “null and void” to draw greater
meaning than “void” or “null” alone is misplaced. “Null and void” to-
gether mean the same as either of the words separately. In the tradition
of “rest, residue, and reminder,” “hue and cry,” and “part and parcel,”
among others, the marriage of the word “null” to “void” is a matter of
historical accident, harking back to the early need in the law for
emphasis in the form of repetition, rather than division of meaning.
The words are synonymous. See, Mellinkoff, The Language of the Law,
pp. 358-360 (1963).

a 237

JANICE P. CUMMINS v. MARTIN L. REDMAN.

251 N. W. 2d 343.

February 18, 1977—Nos. 46748, 46954.

Donald A. Hillstrom, for appellant.
Friedell, McGinty, Solomon, Marker, Watson & Shinofield and
Howard S. Marker, for respondent.

PER CURIAM.

The marriage between these parties was dissolved in-1969. The
decree which incorporated a stipulation between the parties rela-
tive to the obligation of support for the children of the parties
provided as follows:

“That the defendant pay to the plaintiff as and for permanent
support for the three (3) minor children of the parties the sum
of Four Hundred Fifty ($450.00) Dollars per month in equal
installments of Two Hundred Twenty-five ($225.00) Dollars
each on the 13th and 26th of each month. That as each child be-
comes twenty-one (21) years of age, is self-supporting or emanci-
pated, the monthly support payment for the remaining children

238

shall be reduced One Hundred Fifty ($150.00) Dollars per
month. That the defendant also shall be allowed to claim the three
minor children of the parties as exemptions on his Federal and
State income tax returns.”

The father ceased making support payments for Leslie Ann,
porn May 25, 1954, on June 1, 1972, and for Michael born October
5, 1956, on May 25, 1975. The mother in 1975 brought an action
against the father in the Hennepin County Municipal Court to
recover the arrearages due for the child support. The answer
interposed the defense that the two children had been self-sup-
porting or emancipated during the period which support pay-
ments would have otherwise become due. During the course of
the trial the father moved to have the matter transferred to the
Hennepin County District Court, Family Court Division, on the
basis that the municipal court did not have jurisdiction and that
the father was seeking forgiveness of any arrearages. The trial
court denied the motion and subsequently found against the
father as reviewed hereinafter.

After the completion of the trial in municipal court, the father
moved the family court for an order establishing the two children
were self-supporting or emancipated and that the wife was
estopped from asserting her claim for arrearages. The motion
also requested that the father be forgiven of any and all arrear-
ages.

The municipal court made amended findings holding that the
daughter was not self-supporting or emancipated and ordered
judgment against the husband in the sum of $5,400.1 Thereafter,
the family court found that by submitting to the jurisdiction of
the municipal court relative to the issue of the emancipation of

’ the daughter, the father was estopped from invoking the juris-
diction of the family court and the adjudication of said issue by
1In the action to recover support money for the son the trial court

found the son to be emancipated and self-supporting after finishing
high school.

Es 239

the municipal court be res judicata upon the expiration of the
time for appeal. In addition the family court awarded the mother
$500 as attorneys fees.

On this appeal by the father from the judgment in the mu-
nicipal court and the order of the family court, he asserts as
error:

(1) The determination by both courts that the Hennepin
County District Court, Family Court Division, does not have ex-
clusive jurisdiction of all matters arising out of a dissolution of
a marriage.

(2) The finding that the daughter of the parties was not self-
supporting or emancipated.

(3) The allowance of attorneys fees to the wife by the family
court.

The father in urging the family court has exclusive juris-
diction relies on the language of the statute creating the court.
Minn. St. 484.65 provides in part as follows:

“In the * * * fourth judicial district * * * a family court divi-
sion of the district court is hereby created * * *.”

Minn. St. 484.65, subd. 2, provides:

“Said district court judge shall hear and determine all family
matters assigned to him by the chief judge of the fourth judicial
district with the approval of the majority of the judges of said
district.” .

This language hardly creates exclusive jurisdiction. What was
involved in the municipal court was merely a suit to recover ac-
erued arrearages. This entailed only the determination of the
fact question whether or not the daughter was self-supporting
or emancipated. As the trial court pointed out the action was not
an effort to modify the decree but merely to interpret it.

The statute which established the Hennepin County Municipal
Court makes clear that unless specifically excepted, the munici-
pal court has all the power and jurisdiction of the district court.

Po

240

Minn. St. 488A.01. The major jurisdictional exceptions, in addi-
tion to the amount involved and cases involving title to real
estate, are provided in subd. 7 which provides the municipal
court does not have jurisdiction over “an action for divorce.” As
noted, the suit considered by the municipal court was one only
to recover on a judgment for arrearages. This court in Hampton
v. Hampton, 308 Minn. 500, 229 N. W. 2d 139 (1975), which was
an action to enforce support payments in a contempt proceedings,
said:

«* * * [T]he judgment is enforceable by ordinary remedies
such as levy, attachment, garnishment, and other proceedings
available to judgment creditors under the laws of this state.”

Hence the municipal court was not trespassing upon the family
court’s jurisdiction in passing on this action to recover on a judg-
ment for arrearages.

The proceedings by the father in the family court was based
upon a showing by affidavit that the daughter was emancipated
and self-supporting. The affidavit summarized the evidence
presented to the municipal court.

Briefly, the evidence developed in the municipal court proceed-
ings showed that after finishing high school the daughter, while
living at home, worked for 1 year. After a trip to Europe, she
decided to attend college. Her mother paid her tuition and pro-
vided her with clothes and medical expenses.

There was no evidence of relinquishment of control and au-
thority of the child or a severance of the parent-child relation-
ship set forth as guidelines in In re Settlement of Fiihr, 289
Minn. 322, 184 N. W. 2d 22 (1971). That the trial court was cor-
rect in holding the daughter was not emancipated or self-sup-
porting is exemplified by contrasting the daughter’s situation
with that of the son. After finishing high school, the son left the
home and was either working or looking for a job.

The father represents that the case of Brugger v. Brugger,
303 Minn. 488, 229 N. W. 2d 131 (1975), placed him at a disad-

Es 241

vantage because when the legislature reduced the age of majority
from 21 to 18 he relied on that law to cease making payments.
The daughter finished high school on June 9, 1972, when she was
18 years old. The law changing the age of majority was not
changed to 18 years until June of 1973. Minn. St. 645.45, 645.451,
and 518.54. The father stopped support payments a full year be-
fore the enactment of the law changing the age of majority. He
should not be permitted to escape his obligation made as a result
of an agreement between the parties at the time of the divorce.
Yaeger v. Yaeger, 8303 Minn. 497, 229 N. W. 2d 187 (1975).
The father’s counsel stated in his brief as follows:

«x * * The power of the Court to award attorney fees is
limited to‘. . . proceeding(s) brought either for dissolution or
separate maintenance, . . .’ and when the award is ‘. . . neces-
sary to enable the other spouse to carry on, or to contest the pro-
ceeding .. .’” Minn. St. 518.14.

The above-quoted is only part of the statute. Minn. St. 518.14 also
provides:

«ce * ® An award of attorney’s fees made by the court during
the pendency of the proceeding * * *.”
The statute authorizes the award of the attorneys fees. It is
further ordered that the mother be awarded attorneys fees on
this appeal in the sum of $350. Lenzmeier v. Lenzmeier, 304
Minn. 568, 231 N. W. 2d 71 (1975).

Affirmed.

242 EE

IN RE ARBITRATION BETWEEN VIOLA A. WACKER
AND OTHERS v. ALLSTATE INSURANCE COMPANY.

251 N. W. 2d 346.

February 25, 1977—No. 46607.

James M. Shultz, for appellant.
DePareqg, Anderson, Perl & Hunegs, Norman Perl, and
Stephen S. Eckman, for respondents.

Heard before Kelly, Yetka, and Scott, JJ., and considered and
decided by the court en banc.

YETKA, JUSTICE.

This case involves the arbitration of an uninsured-motorist
clause in an insurance policy. After beneficiary of the policy
entered into a settlement agreement with the insurance company,
she challenged the validity of the settlement and prevailed in
arbitration proceedings. The insurance company appeals from
a judgment confirming the award of arbitration. We affirm.

The following issues are presented in this appeal:

(1) Whether appellant insurance company properly moved
for a vacation of the confirmation of the award of arbitration
within the 90-day statutory period allowed by the Uniform Arbi-
tration Act.

ee 243

(2) Whether the validity of a settlement agreement entered
into between an insurance company and the beneficiary of an
uninsured-motorist endorsement is an arbitrable issue.

Ervin Wacker died in an automobile accident on December
24, 1970, when the car which he was driving was hit head on by
an intoxicated, uninsured motorist. At the time of the accident,
2:45 a. m., Wacker was on his way to work at the State Capitol
as foreman of the grounds crew, having been called in for a
special snow removal assignment. Wacker was driving east on
Highway No. 5 and had just passed through the Fort Snelling
Tunnel and onto the bridge over the Mississippi River when his
car was hit. The uninsured motorist, who had allegedly been
drinking at the Contact Bar, Inc., at Fort Snelling, had apparent-
ly entered the freeway on an exit ramp and had been driving
west on the eastbound freeway.

Wacker was insured at the time of the accident by appellant,
Allstate Insurance Company (insurance company). One’ policy
(No. 0 11 736 107) was in effect which covered the two cars
owned by Wacker. A separate premium was charged for un-
insured-motorist coverage for each car. The uninsured-motorist
coverage for each car was the statutory minimum, $10,000/
$20,000.

Ervin Wacker’s widow, Viola Wacker, retained counsel to pro-
bate the estate and also to pursue her rights under the insurance
policy. On January 29, 1971, counsel contacted the insurance
company, indicated he represented Mrs. Wacker, and started
negotiations.

After several months of negotiation, the insurance company
and counsel for Viola Wacker settled on the sum of $6,500. On
the advice of counsel, on November 23, 1971, Mrs. Wacker signed
a release form, providing in pertinent part:

“In consideration of the payment of Six Thousand Five Hun-
dred And 00/100 Dollars by the ALLSTATE INSURANCE COMPANY,
the receipt of which is hereby acknowledged, the ALLSTATE IN-

Pe

244 EE

SURANCE COMPANY, is hereby released and discharged from any
and all liability whatsoever under the Bodily Injury Benefit
Coverage of Policy No. 11 736 107 issued to Ervin Wacker by
the ALLSTATE INSURANCE COMPANY, for injuries sustained by
Ervin Wacker due to an accident on or about the 24th day of
December, 1970.”

This release form was witnessed by one of Mrs. Wacker’s
children, Mrs. Layton Carlson, and is limited to Policy No. 11
736 107.

Mrs. Wacker also executed the following trust agreement:

“Trust AGREEMENT
November 18, 1971

“Mrs. Viola Wacker hereinafter referred to as the Trustee,
having sustained damages because of bodily injury, sickness, or
disease or death from an event which occurred on December 24,
1970, as the result of which claim has been made to Allstate
Insurance Company hereinafter referred to as the Beneficiary,
under its policy 11 736 107 and in Consideration of the payment
to be made pursuant to said Bodily Injury Benefit Coverage, it
is hereby agreed that the Trustee will hold for the benefit of the
Beneficiary all rights, claims, and causes of action which the
Trustee has or may have against any person or persons, organi-
zation, association or corporation other than the Beneficiary be-
cause of bodily injury, sickness, or disease or death which is the
subject of the claim made against the Beneficiary.

“The Trustee agrees to take, through any representative des-
ignated by the Beneficiary, such action as may be necessary or
appropriate to recover the damages suffered by the Trustee from
any person or persons, organization, association or corporation
other than the Beneficiary who may be legally liable therefor,
such action to be taken in the name of the Trustee, the Benefi-
ciary to pay all costs and expense in connection therewith. It is
further agreed that any monies recovered by the Trustee as the
result of judgment, settlement, or otherwise will be held in trust

P| 245
and paid to the Beneficiary, provided, however, any sum re-
covered in excess of the total amount paid by the Beneficiary to
the Trustee under the terms of the above-mentioned policy, shall
be retained by the Trustee for his own use and benefit.”

The insurance company issued a check for $6,500 payable to
Mrs. Wacker and her attorney, which they negotiated.

On November 24, 1971, counsel returned the release and trust
agreement to the insurance company with a letter which stated:

“Please find enclosed herewith and returned to you the Re-
ceipt and Release Under Bodily Injury Benefit Insurance and
Trust Agreement as same have been signed by Mrs. Viola
Wacker. These documents are returned to you on the basis of the
$6,500.00 settlement and on the basis that it release Allstate
Insurance Company as to any further payment under Coverage
‘S$’ as to uninsured motorists regarding bodily injury and as to
the right to proceed against the owner of the uninsured vehicle.”

The apparent reason for returning the documents was that
counsel had turned over the handling of a dram shop claim to
respondents’ present counsel in this appeal.+

At this point renegotiations by respondents’ present counsel
with the insurance company for a higher settlement figure were
commenced. On December 7, 1978, respondents’ present counsel
wrote to the insurance company and made demand for an ad-
ditional $18,500 because the uninsured-motorist provision of the
policy covered two vehicles owned by Mr. Wacker for which two
premiums were paid. The insurance company refused the de-
mand.

Finally, on January 29, 1975, respondents’ present counsel
made a demand for arbitration. The arbitration clause of the
policy stated:

“The determination as to whether the insured shall be legally
entitled to recover damages, and if so entitled the amount there-
of, shall be made by agreement between the insured and Allstate.

1 This claim was later settled for $77,500.

246 . a

“In the event of disagreement and upon written demand of
the insured, the matter or matters upon which the insured and
Allstate do not agree shall be settled by arbitration in accordance
with the rules of the American Arbitration Association, and
judgment upon the award rendered by the Arbitrator(s) may
be entered in any Court having jurisdiction thereof. The insured
and Allstate each agrees to consider itself bound and to be bound
by any award made by the Arbitrator(s) pursuant to this Sec-
tion IT.”

In the demand for arbitration, however, counsel also listed a
second policy (No. 11 908 512 H 627), which turned out to be a
homeowners policy.

The insurance company filed an answer, objecting to the arbi-
tration of the claim. Paragraph II of the answer states:

“That the policies of insurance referred to in the Demand for
Arbitration provide for Protection Against Bodily Injury by Un-
insured Automobiles, under Section II of said policy, and further
provides that, ‘The determination as to whether the insured shall
be legally entitled to recover damages, and if so entitled the
amount thereof, shall be made by agreement between the insured
and Allstate.’ ” (Italics supplied.)

Thus, at this time it appears that the parties were not aware that
the second policy referred to was a homeowners policy.

The insurance company’s motion for stay of the arbitration
proceedings was denied on March 24, 1975, by the district court,
and the parties were ordered to proceed with arbitration.

The arbitration proceedings were heard on June 18, 1975, by
John H. Ramstead, arbitrator. Mrs. Wacker, represented by her
present counsel, took the position that the release and trust
agreement should be set aside for two reasons: First, that Mrs.
Wacker made a unilateral mistake of fact because she was not
aware that she might be able to get more money; second, that
the release and settlement did not bind Mr. Wacker’s children.

The insurance company contended that the settlement agree-

—— 247

ment was binding and thus eliminated the possibility of a “dis-
agreement,” a condition precedent to arbitration. It also pointed
out that the second insurance policy listed on the claim for arbi-
tration was a homeowners policy.

The parties stipulated that Mr. Wacker was insured under
Policy No. 0 11 736 107 with the insurance company at the time
of his death; that the policy limits were $10,000 for one injury;
that Mr. Wacker died as a result of an accident that was the fault
of an uninsured driver; and that the one policy insured two
vehicles.

At the close of the arbitration hearing, the arbitrator listed
four issues to be decided: (1) Whether the settlement agreement
was binding; (2) whether the settlement, if valid, bound the
other heirs of Mr. Wacker; (3) whether the provisions of the
policy that provide for payment to the surviving spouse mean
that those payments are not to include amounts made for the
benefit of the children of the decedent; (4) whether there was
an additional $10,000 of uninsured motorist coverage available
for damages resulting from the accident of December 24, 1970,
under Policy No. 0 11 736 107.

On September 5, 1975, the following award was made:

“THE UNDERSIGNED ARBITRATOR, designated under the arbitra-
tion provision of Policy No. 011 786 197 & 11 903 512 H 627, hav-
ing been duly sworn and having heard the proofs and allegations
of the parties, AWARDS as follows:

ALLSTATE INSURANCE COMPANY shall pay to VIOLA A. WACKER,
for the benefit of Viota A. WACKER, KATHLEEN K. WACKER,
‘VIRGENE CARLSON, KaREN TELTHOESTER AND LARRY WACKER the
sum of THIRTEEN THOUSAND FivE HUNDRED DOLLARS ($18,-
500.00).

“This Award is in full settlement of all claims submitted to
this arbitration.” (Italics supplied.)

Note again that the homeowners policy is mentioned.
On motion, the district court entered an order confirming the

248 a

award. Judgment was entered and the insurance company ap-
pealed from that judgment.

The dispositive issue in this case is the failure of appellant to
apply for vacation of the arbitrator’s award within the 90-day
statutory period.

Uninsured-motorist endorsements of an automobile liability
policy are subject to arbitration when the endorsements include
an agreement to arbitrate such controversies. See, Dunshee v.
State Farm Mutual Auto. Ins. Co. 308 Minn. 478, 228 N. W. 2d
567 (1975). In the absence of a contrary agreement between the
parties, written agreements to arbitrate are interpreted with
reference to the Uniform Arbitration Act, Minn. St. c. 572. Com-
ponent Systems v. Murray Enterprises of Minn. 300 Minn. 21,
23, 217 N. W. 2d 514, 515 (1974).

Section 572.18 sets forth the rule for confirmation of an award
and states:

“Upon application of a party, the court shall confirm an
award, unless within the time limits hereinafter imposed grounds
are urged for vacating or modifying or correcting the award,
in which case the court shall proceed as provided in sections
572.19 and 572.20.”

Minn. St. 572.19, subd. 2, sets a 90-day limit from the delivery
of the copy of the award to apply for vacation:

“Subd. 2. An application under this section shall be made
within ninety days after delivery of a copy of the award to the
applicant, except that, if predicated upon corruption, fraud or
other undue means, it shall be made within 90 days after such

. grounds are known or should have been known.”

The award of arbitration was served on appellant on Septem-
ber 8, 1975. No action was taken by the insurance company dur-
ing the next 90 days. On December 10, 1975, Mrs. Wacker, by
her attorney, gave a notice of motion and motion to confirm the
award. The motion was heard on December 17, 1975, and the
award was confirmed.

ee 249

The appellant makes no claim that the award was predicated
upon corruption, fraud, or any other undue means which would
possibly delay the running of the 90-day period. Therefore, there
is little choice but to view the running of the statutory period
as precluding a challenge to the award of arbitration on appeal.
In Component Systems v. Murray Enterprises of Minn. 300
Minn. 21, 24, 217 N. W. 2d 514, 516 (1974), this court took notice
of the clear mandate of the uniform act provisions on the chal-
lenging of the confirmation of an award:

“The act plainly requires that an application to vacate an
award must be made within 90 days after delivery of the award
to the applicant unless the award is predicated upon corruption,
fraud, or other undue means, in which case the vacation applica-
tion must be made within 90 days after such grounds are known
or should have been known. In this case respondent made applica-
tion to confirm the award over 8 months after the award was
delivered, and no application to vacate had been made by appel-
lant during that time. Therefore, the trial court was obliged to
confirm the award.”

Also, as pointed out in Component Systems, courts in several
other states have held that a motion to vacate an award is abso-
lutely barred when it is not brought within the 90-day statutory
limitation period.?

Appellant acknowledges it has no basis on which to vacate the
arbitration award, but argues the case should not have gone to
arbitration because the agreement foreclosed it.

The difficulty with this argument is that appellant’s proper
remedy would have been to move to vacate the award, once made,

2Component Systems v. Murray Enterprises of Minn. 300 Minn. 21,
25, 217 N. W. 2d 514, 516, citing In re Mayo Realty Corp..68 N. ¥. S. 2d
843 (1947); Heidelberger v. Cooper, 300 N. Y. 502, 89 N. B. 2d 21 (1949);
Airways Supermarkets Inc. v. Santone, 277 App. Div. 722, 102 N. Y. S.
2d 649 (1951); Emporium Area Joint School Authority v. Anundson
Const. & Bldg. Supply Co. 402 Pa. 81, 166 A. 2d 269 (1960); Nix v. Spector
Freight System, Inc. 62 N. J. Super. 218, 162 A. 2d 590 (1960). .

250 es

on the ground that the arbitrator exceeded his powers under
Minn. St. 572.19. Not having done so, there is now nothing to re-
view on appeal and it must fail.

Affirmed. _

ST. PAUL AREA CHAMBER OF COMMERCE v.
MINNESOTA PUBLIC SERVICE COMMISSION.
MINNESOTA PUBLIC INTEREST RESEARCH GROUP,
INTERVENOR-APPELLANT.

CITY OF ST. PAUL, INTERVENOR-APPELLANT.

251 N. W. 2d 350.

February 25, 1977—Nos. 47031, 47046, 47061, 47126,

P|
Warren. Spamnaus, Attorney General, and Jerome L. Getz,
Assistant Attorney General, for appellant commission.

Elliot Rothenberg, for intervenor-appellant Minnesota Public
Interest Research Group.

Harriet Lansing, City Attorney, and Thomas J.‘ Stearns, As-
sistant City Attorney, for intervenor-appellant City of St. Paul.

O'Connor & Hannan, Richard G. Morgan, John J. Sommerville,
and Nancy F. Fowler, for respondent.

Warren Spannaus, Attorney General, Richard B. Allyn, So-
licitor General, and Stephen Shakman, Special Assistant At-
torney General, amicus curiae, seeking reversal.

Briggs & Morgan, Leonard J. Keyes, A. R. Renquist, D, A.
Lawrence, for Northern States Power Company, amicus curiae,
seeking affirmance.

ee

Scort, JUSTICE.

These are appeals from a judgment of the Ramsey County
District Court wherein it modified the allocation of revenue re-
sponsibility rates among customer classes as ordered by the
Minnesota Public Service Commission under the Public Utilities
Act, Minn. St. c. 216B, and imposed a new rate allocation. We
reverse.

On January 2, 1975, Northern States Power Company (NSP)
filed with the Public Service Commission (commission) an ap-
plication for a change in rates, together with supporting sched-
ules and written testimony. Hearings on the application were
conducted in two phases, the first primarily concerned with
revenue and the second with rate structure. Four hearings were

FE

252 a

held at which members of the public could testify; in all there
were 26 days of hearings from June 8 to September 11, 1975.

The commission issued its findings of fact, conclusions of law,
and order on October 31, 1975. The decision consists of two parts,
only the latter of which is at issue on appeal: (1) the NSP-re-
quested revenue increase of $60,000,000 was reduced to
$38,640,000, for an average rate increase of 10.4 percent, (2)
the NSP-proposed rate structure was modified, thereby real-
locating the burden among the various consumer classes. The
chart below, prepared by the commission, shows how the rate
structure was altered:

NSP Commission
Proposed Determination

$ % $ %
Class Millions Increase Millions Increase
Residential 23.0 15.8 11.5 1.9
Small C &I 10.3 13.8 3.9 5.8
Large C & I 24.9 17.8 214 15.3
Public Lighting 10 16.0 1.0 16.0
Other Public Sales 38 15.9 38 15.9
TOTAL 60.0 16.1 38.6 10.4

The basis for the NSP structure was essentially cost of
service, that is, the rate charged to a given class was set pro-
portional to the cost of delivering electricity to that class. The
commission, while acknowledging the importance of cost of
service as a criterion, indicated that it would also consider four
additional factors in establishing the rate structure: (1) the
ability to pay the increases, (2) the ability to “pass on” the in-
creases, (3) the ability to “write off” electric costs. on taxes, (4)
the value of service to the customer. These factors, the commis-
sion felt, justified it in placing a greater share of the burden of
the increase on large commercial and industrial users, while
correspondingly lessening the burden of the increase on resi-
dential users.

—— ee 258

The St. Paul Area Chamber of Commerce (St. Paul Chamber)
and the Minneapolis Association of Building Owners and Manag-
ers filed petitions for rehearing which challenged the commis-
sion’s rate schedule. On December 10, 1975, the commission
issued supplemental findings and denied the petitions for re-
hearing. The St. Paul Chamber then brought an appeal to the
district court.

The district court of Ramsey County issued its opinion and
order on June 21, 1976. Its decision has three essential parts:
(1) the scope of review for commission decisions is governed
by the Administrative Procedure Act, Minn. St. 15.0425, making
the “substantial-evidence” test appropriate, (2) the commis-
sion’s rate structure was not supported by substantial evidence
in the record, (3) the commission’s structure was to be modified
to conform to the evidence. The district court accepted the com-
mission’s revenue determination at $88.64 million, but rejected
its use of noncost factors to place a greater share of the increase
on the large commercial and industrial users. The court con-
structed its own allocation of the increase, incorporating parts
of both the NSP proposal and the commission’s structure. The
chart below, prepared by the district court, demonstrates these
changes:

NSP Commission Court Extension

Proposed Determination of NSP Proposal
$ % $ %o $ Jo
Mi- In Mil- Ine Mil. In-

Class lions crease lions crease lions crease
Residential 23.0 158 11.5 79 1481 10.2
Small C &I1 103 18.8 3.9 5.3 6.63 8.9
Large C &I 249 17.8 214 15.3 16.04 11.5
Public Lighting 10 16.0 10 16.0 64 10.2
Other Public Sales 8 15.9 8 15.9 52 = 10.1

10.4 38.64

TOTAL 60.0 161 386 10.4

254 ee

The overall effect was to restore the relative increases for resi-
dential and large commercial and industrial users originally
proposed by NSP based solely upon the cost-of-service criterion.
The district court held that the commission allocation was un-
reasonably preferential and discriminatory in that it relied upon
“social judgments” not supported by-record evidence and there-
fore exceeded the legislative powers of the commission.

The issues considered on these appeals are:

(1). What factors may be considered by the Public Service
Commission in the allocation of rate increases among consumer
classes?

(2) What standard of review is to be applied by the district
court when the Public Service Commission is challenged on its
rate determination?

I As we have said in previous cases of this kind, ratemaking
is an inherently legislative function not to be exercised by the
courts. State v. Tri-State T. and T. Co. 204 Minn. 516, 284 N. W.
294 (1989); State and Port Authority of St. Paul v. N. P. Ry.Co.
229 Minn. 312, 39 N. W. 2d 752 (1949); Minneapolis St. Ry. Co.
v. City of Minneapolis, 251 Minn. 48, 86 N. W. 2d 657 (1957).
We recently reaffirmed this principle in Northwestern Bell
Telephone Co. v. State, 299 Minn. 1, 28, 216 N. W. 2d 841, 857
(1974) :

«* * * Ratemaking is a legislative and not a judicial function.
In complex cases such as this, the court should, and does, accord
the commission great deference in reviewing its decision. The
rates fixed by the commission are presumed to be reasonable and
just until the contrary is shown by clear and convincing evidence.
In this area, the court’s only function is to protect constitutional
rights and not to substitute its own judgment for that of the com-
mission. State v. Tri-State T. & T. Co. 204 Minn. 516, 284 N. W.
294 (1939); Minneapolis St. Ry. Co. v. City of Minneapolis, 251
Minn. 48, 72, 86 N. W. 2d 657, 676 (1957). We do not find a rate
‘ of return of 7.5 percent of trended value to be unjust, unreason-
able, or discriminatory, and therefore affirm.”

ee 255

The process of establishing rate allocations among diverse
consumer classes is one requiring both technical expertise on the
one hand and a careful balancing of many complementary and
competing interests on the other. In recent years such paramount
factors as the prevention of environmental pollution and the
conservation of our energy resources have been added to the
equation whenever decisions regarding electricity must be made.
We therefore cannot agree with the position taken by the dis-
trict court and by the St. Paul Chamber that the commission is
limited to considering only factors on which substantial evidence
has been presented. This may well be the case with the cost-of-
service criterion, which has historically been the basis for electric
rate structures in Minnesota. We believe it to be in the public
interest, which the legislature was surely intending to serve in
the broadest sense by establishing the Public Service Commis-
sion, that the commission be allowed within the bounds of reason-
ableness to consider both facts within its expertise and facts of
common knowledge in arriving at its decisions in the ratemaking
area,?

As to the first of these categories, we must presume that the
members of the commission itself, with their supporting staff,
have in their grasp practical knowledge in the field of utilities
regulation not possessed by either the courts or laymen in
general. This is the same presumption which courts have always
made with regard to the legislature and its delegated agencies,
most especially in areas where special knowledge and expertise
are required. The field of electric power regulation is no differ-
ent in this respect, and indeed has become even more complex
as energy costs have soared and resources have become scarce.

1 This intent is clearly spelled out in Minn. St. 216B.03:

“Every rate made, demanded, or received by any public utility, or by
any two or more public utilities jointly, shall be just and reasonable.
Rates shall not be unreasonably preferential, unreasonably prejudicial
or discriminatory, but shall be sufficient, equitable and consistent in
application to a class of consumers. Any doubt as to reasonableness
should be resolved in favor of the consumer. * * *.” (Italics supplied.)

256 ee
The commission, in order to carry out its mandate from the
legislature to establish “just and reasonable” rates, must be able
to draw on its own internal sources of knowledge and experience.
As with the legislature itself, we assume that it does so in each
instance and that we ought not to interfere unless it should
clearly exceed its statutory powers.

As to the latter category, we must further grant to the com-
mission the capacity akin to the doctrine of “judicial notice’—
the process whereby a court acknowledges facts of common
knowledge which may not have been introduced in evidence
through witnesses. In the present case, for example, it is a mat-
ter of common knowledge that the custom of the commercial
users is to employ electrical energy profitably, deduct the ex-
pense of such energy as a cost of doing business for income tax
purposes, and add the residual cost to the price of the service
or product which they produce, while it is similarly known that
private consumers of electricity cannot so deduct or pass on
electrical costs. Such facts allow the inference that in the major-
ity of cases a rate increase must be fully paid for in cash by resi-
dential consumers, who may also end up paying for a portion
of the commercial rate increase due to the pass-on effect just
described. It is not a leap of logic to then say that for the most
part commercial users of electricity are more “able to pay” a
rate increase than residential users. While such assumptive rea~
soning would not ordinarily be employed by a court, which must
in most cases confine itself to the evidence, it may be legitimately
employed by a legislative agency attempting to serve the public
interest at large in a way that courts cannot.

It therefore follows that in deciding how to allocate additional
electric costs, the commission may consider factors drawn from
its own expertise, from facts generally in the public knowledge,
and from the evidence presented to it in more formal processes.
Unless the commission can be shown to have relied upon certain
factors to the extent that clear injustice has resulted, or that its
legislative authority has been clearly exceeded, we hold ‘that the

— ee 257

courts may not restrict the scope of matters which the commis-
sion may consider in allocating electric costs among classes of
consumers.

Interested parties adversely affected by a rate structure which
discriminates between commercial and noncommercial users
should have, and in this case did have, an opportunity to pre-
sent evidence before the commission in support of a claim that
discrimination in rates between commercial and noncommercial
users is unreasonable, or that any discrimination exceeding a
fixed level of difference would be unreasonable. Evidence could
be introduced, for example, to establish that a difference in
rates based on factors other than the cost of furnishing the
service to the user would be unfair, inequitable, and unreasonable
in a particular situation. The commission would then be required
to evaluate the evidence so offered together with facts commonly
known. In the event of an appeal to the district court, that court
would be required to assess the facts commonly known, together
with the facts offered in evidence, and decide whether the rate
structure established by the commission was established at a
reasonable and rational level having support in the evidence.

We therefore agree with the reasoning expressed by the
United States Supreme Court in the Permian Basin Area Rate
Cases, 390 U. S. 747, 815, 88 S. Ct. 1344, 1885, 20 L. ed. 2d 312,
363 (1968):

“* * * Although the [Federal Power] Commission’s exposi-
tion of these questions might have been more carefully drawn,
it has quite appropriately incorporated in its calculations factors
other than producers’ costs. Cost and noncost factors do not, as
the Court of Appeals supposed, race one against the other; they
must be, as they are here, harnessed side by side. The Commis-
sion’s responsibilities necessarily oblige it to give continuing
attention to values that may be reflected only imperfectly by pro-
ducers’ costs; a regulatory method that excluded as immaterial
all but current or projected costs could not properly serve the
consumer interests placed under the Commission’s protection.

258 Es

We have already considered each of the points at which the Com-
mission has given weight to noncost factors, and have found its
judgments consistent with the terms and purposes of its statu-
tory authority.”

HE The district court relied upon our decision in Minneapolis
Van & Warehouse Co. v. St. Paul Terminal Warehouse Co. 288
Minn. 294, 180 N. W. 2d 175 (1970), in holding that the “sub-
stantial-evidence” test as set out in Minn. St. 15.0425 of the
Administrative Procedure Act, applied to rate determinations
by the commission. NSP, in its brief amicus curiae, goes so far
as to state that this case is “controlling.” We do not believe our
decision in Minneapolis Van can be read so broadly, nor can our
more recent decision in State v. Northwestern Bell Telephone
Co. 310 Minn. 146, 246 N. W. 2d 28 (1976), be read to extend
Minneapolis Van on this point.

In Minneapolis Van we held that the Administrative Procedure
Act, specifically § 15.0425, made the substantial evidence test
applicable to factual findings by the commission:

“The statutory rule also settles any doubt of our conformity
with the majority of courts, both state and Federal, in accepting
the substantial-evidence rule as the rule governing the scope of
all judicial review of evidence supporting factual findings of
administrative agencies. 4 Davis, Administrative Law Treatise,
§ 29.11. As Professor Davis points out in chapter 29 of his com-
prehensive treatment of this subject matter, substantial evi-
dence is more than ‘a scintilla’ and is ‘such relevant evidence as
a reasonable mind might accept as adequate to support a con-
clusion.’ § 29.02. The main inquiry by the district court is
‘whether on the record * * * [the commission] could reason-
ably make the finding.’ § 29.01. While the test is ‘vague, rather
than precise’ and the ‘intensity of review’ may vary from case
to case, § 29.11, the ‘test is the same as the test on review of a
jury verdict, but the review is narrower than the review of the
findings of a judge sitting without a jury,’ § 29.01, the latter

—— 259

being governed by the ‘clearly erroneous’ test. § 29.11. The
burden is upon the appellant to establish that the findings of the
commission are not supported by the evidence in the record,
considered in its entirety. If the evidence is conflicting or the
undisputed facts permit more than one inference to be drawn,
the findings of the commission may not be upset and the district
court may not substitute its judgment for that of the commis-
sion.” 288 Minn. 298, 180 N. W. 2d 177. (Italics supplied.)

The following language from Northwestern Bell makes clear that
it does not extend the applicability of Minneapolis Van:

“Ordinarily the broad language of § 15.0425, by its terms
applicable to ‘any proceedings for judicial review by any court
ef decisions of any agency,’ could be construed as manifesting
a legislative intention that this general enactment prevail over
the negative implications of § 237.25. Such a principle of statu-
tory construction is stated in Minn. St. 645.26, subds. 1 and 4.
Thus, we have held in Minneapolis Van &.Warehouse Co. v. St.
Paul Terminal Warehouse Co. 288 Minn. 294, 180 N. W. 2d 175
(1970), that the ‘substantial evidence’ standard in § 15.0425(e)
governs the scope of review of commission orders rather than
the ‘any evidence’ standard derived from § 216.25 as interpreted
in Dahlen Transport, Inc. v. Hahne, 261 Minn. 218, 112 N. W.
2d 680 (1961). At least with respect to the scope of review of
evidentiary determinations, therefore, the Administrative Pro-
cedure Act will prevail over apparently conflicting statutory
provisions dealing with appeals from decisions of the commis-
sion.” 310 Minn. 150, 246 N. W. 2d 80. (Italics supplied.)

Taken together, these two decisions make the substantial-evi-
dence test of § 15.0425 applicable to commission decisions only
when it is acting in a quasi-judicial manner, in a role similar to
that of a trial judge sitting without a jury. In cases where the
commission acts primarily in a judicial capacity, that is, hearing
the views of opposing sides presented in the form of written and
oral testimony, examining the record, and making findings of

260

fact, the administrative process is best served by allowing the
district court to apply the substantial evidence standard on
review. This is so because in such a case the district judge is able
to review all of the evidence as he would in any trial and can,
within the knowledge parameters of his own expertise, determine
whether or not each finding is supported by substantial evidence.
There is no policy reason why the commission’s finding should
not be required to satisfy the substantial-evidence test on this
issue. The absence of challenge to this aspect of the commission’s
decision indicates the parties are satisfied it was supported by
substantial evidence.

As our previous discussion makes clear, however, rate alloca-
tion is not a judicial or quasi-judicial function. Once revenue re-
quirements have been determined it remains to decide how, and
from whom, the additional revenue is to be obtained. It is at this
point that many countervailing considerations come into play.
The commission may then balance factors such as cost of service,
ability to pay, tax consequences, and ability to pass on increases
in order to achieve a fair and reasonable allocation of the in-
crease among consumer classes. This determination must result
in rates which are “just and reasonable” and rates “shall not be
unreasonably preferential, unreasonably prejudicial or discrimi-
natory, but shall be sufficient, equitable and consistent in appli-
cation to a class of consumers.” Minn. St. 216B.03. It is clear that
when the commission acts in this area it is operating in a legisla-
tive capacity, as the above cases have stated. The careful balanc-
ing of public policies and private needs is not a matter for the
courts, unless statutory authority has been exceeded or discretion
abused. As to rate allocations, the teaching of Northwestern Bell
Telephone Co, v. State, 299 Minn. 1, 28, 216 N. W. 2d 841, 857,
remains the law: “The rates fixed by the commission are pre-
sumed to be reasonable and just until the contrary is shown by
clear and convincing evidence.” The function of the district court
is not to “substitute its own judgment for that of the commis-
sion,” but is only to ensure that the rate structure adopted by

ee 261

the commission is not “unjust, unreasonable, or discriminatory.”
Ibid. The burden is upon those who would challenge a commis-
sion allocation to show by clear and convincing evidence that the
allocation contravenes the requirements of § 216B.03. In ascer-
taining whether or not the statute has been contravened, the
district court must give wide latitude to the commission in al-
lowing it to consider many factors which might not ordinarily
be considered by a court, as we have explained above. This is so
because, while the court is qualified to review agency findings
when an agency acts in a quasi-judicial manner in factual mat-
ters, it is not so qualified to review legislative judgments when
social policies must be weighed in the balance.

Our analysis comports with that established by the United
States Supreme Court in the Permian Basin Area Rate Cases,
390 U. S. 747, 767, 88 S. Ct. 1344, 1360, 20 L. ed. 2d 312, 336. In
reviewing a Federal Power Commission rate decision under the
Natural Gas Act, the Supreme Court stated:

“Section 19(b) of the Natural Gas Act provides without quali-
fication that the ‘finding of the Commission as to the facts, if
supported by substantial evidence, shall be conclusive.’ More im-
portant, we have heretofore emphasized that Congress has en-
trusted the regulation of the natural gas industry to the informed
judgment of the Commission, and not to the preferences of re-
viewing courts. A presumption of validity therefore attaches to
each exercise of the Commission’s expertise, and those who would
overturn the Commission’s judgment undertake ‘the heavy
burden of making a convincing showing that it is invalid because
it is unjust and unreasonable in its consequences.’ FPC v. Hope
Natural Gas Co., swpra, at 602. We are not obliged to examine
each detail of the Commission’s decision; if the ‘total effect of
the rate order cannot be said to be unjust and unreasonable,
judicial inquiry under the Act is at an end.’ Ibid.

“Moreover, this Court has often acknowledged that the Com-
mission is not required by the Constitution or the Natural Gas

262 EE

Act to adopt as just and reasonable any particular rate level;
rather, courts are without authority to set aside any rate selected
by the Commission which is within a ‘zone of reasonableness.’
FPC v. Natural Gas Pipeline Co., 315 U. 8. 575, 585. No other
rule would be consonant with the broad responsibilities given
to the Commission by Congress; it must be free, within the
limitations imposed by pertinent constitutional and statutory
commands, to devise methods of regulation capable of equitably
reconciling diverse and conflicting interests. It is on these
premises that we proceed to assess the Commission’s orders.”
We adopt this reasoning as the standard in Minnesota when
courts are called upon to review the allocation of rate increases
among consumer classes.

Combining this rule with that adopted above for factual de-
terminations, we may summarize as follows:

(a) When the Public Service Commission acts in a judicial
capacity as a factfinder, receives evidence in order to make fac-
tual conclusions, and weighs that evidence as would a judge in
a court trial, it will be held on review to the substantial-evidence
standard.

(b) When the Public Service Commission acts in a legislative
capacity as in rate increase allocations, balancing both cost and
noncost factors and making choices among public policy alterna-
tives, its decisions will be upheld unless shown to be in excess
of statutory authority or resulting in unjust, unreasonable, or
discriminatory rates by clear and convincing evidence.

In the present case the district court subjected the commis-
sion’s rate structure to the substantial-evidence test. Under the
preceding analysis, this was error requiring reversal. The usual
course in a case of this type would be remand to the district court
for a review of the evidence under the proper standard. We do
not follow this procedure because it now appears that this case
has become moot as to the 1975 rate increase. The district court
decision below was rendered June 21, 1976, by which time NSP

a 263

had already put into effect a new interim increase pursuant to
a refund condition under Minn. St. 216B.16. This “1976 increase”
is now before the commission, which expects to render a decision
in the near future. In sum, the 1975 rate structure as determined
by the district court has never been put into effect, nor will it
be. If the commission’s decision in the 1976 case is appealed to
the district court, this opinion will control its review.

Despite the fact that no remand will be made in the present
ease, we find it appropriate to comment upon the disposition
made by the court below. While it is true that Minn. St. 15.0425
provides modification as one of the options available to the dis-
trict court, we believe this option ought not be exercised in the
establishment of rate structures. In such cases the administrative
process is best served by remand to the commission if the district
court should find that it exceeded its authority or abused its dis-
cretion under the standards we have herein adopted. The reversal
and modification alternatives should be used only when the com-
mission acts in a judicial capacity as a factfinder, when the dis-
trict court may review the record and apply the substantial-
evidence standard.

Reversed.

Le!
STATE v. JOHN CLINTON BELLCOURT.
251 N. W. 2d 631.

February 25, 1977—No. 46078.

264 |

C. Paul Jones, State Public Defender, for appellant.

Warren Spannaus, Attorney General, Keith M. Brownell,
County Attorney, and Gregory K. Larson, ‘Assistant County At-
torney, for respondent.

Per CURIAM. :

Defendant, appealing from judgment of conviction of ag-
gravated robbery, Minn. St. 609.245, claims (1) that identifica-
tion procedures used violated his right to due process, (2) that
admission of two photographs of him and other evidence im-
properly informed the jury of his criminal record, (3) that the
trial court improperly admitted evidence of another criminal act
by defendant committed after the offense for which he was being
tried, and (4) that the trial court erred in sentencing him to an
increased term in prison pursuant to the dangerous offender act,
Minn. St. 609.16, and that the act is void for vagueness. We af-
firm.

1. Defendant's first claim is that his conviction was based
on identification evidence which was the product of unfair
identification procedures. The test which must be applied in de-
termining this claim is whether, under the record as a whole, it
can be said that there is a substantial likelihood that defendant

_wag irreparably misidentified. Neil v. Biggers, 409 U. S. 188,
93 S. Ct. 875, 34 L, ed. 2d 401 (1972). Applying this test, we con-
clude that the in-court identification of defendant was reliable.

2. Defendant’s claim that the jury was improperly informed
of his criminal record is based on two basic facts. First, de-
fendant points to the fact that enlargements of two front view,
police identification type pictures of him were admitted at trial.
Defendant contends that although the pictures did not contain
any markings to indicate that they were police photographs
taken in connection with prior offenses, the jury nonetheless
might have guessed that they were. The second part of defend-
ant’s argument is that certain witnesses made references to the

a 265

pictures which suggested that the pictures were police photo-
graphs. Extreme caution must be exercised by the prosecution
in the use of this kind of evidence. See, State v. Madison, 281
Minn. 170, 160 N. W. 2d 680 (1968). Under some circumstances
we might order a new trial because of the admission of this kind
of evidence. However, in this case defendant was the first party
to elicit any evidence relating to his pretrial photographic
identification and not only did he not object to any of the evi-
dence which he now claims prejudiced him but in fact he.spec-
ifically stated that he did not object to the admission of the
photographs. Under these circumstances, defendant cannot now
reasonably contend that he should be granted a new trial on the
ground that this evidence prejudiced him.

3. Defendant’s third contention relates to the admission of
evidence of a separate criminal incident in which he was involved
in another town 4 hours after the offense of which he was con-
victed. The robbery occurred in Duluth at 10 p. m. and was com-
mitted by two Indian males, one armed with a gun. The evidence
in question showed that 4 hours later defendant and his brother,
both Indians, were stopped in Red Lake, 171 miles away, after
being observed driving in the opposite direction from Duluth in
a speeding car which had license plates registered to another
automobile. Upon being stopped defendant produced a gun and
he and his brother handcuffed the officers, only later deciding
to let them go in exchange for a promise that the officers would
leave and not press charges.

We believe that the relation of this criminal act to the offense
for which defendant was being tried is substantial, that the evi-
dence was highly relevant to the identification of defendant as
one of the robbers, and that the evidence was not admitted for
the purpose of suggesting to the jury that defendant should be
convicted because of any propensity to commit crimes. Further,
the evidence was needed because the other evidence on the issue
of identification was weak in that only one witness had identified
defendant and defendant had served notice of intent to claim

266 a

alibi. See, State v. Billstrom, 276 Minn, 174, 149 N. W. 2d 281
(1967). :
4, The final issue relates to the trial court’s sentencing de-
fendant to an increased term of 40 years pursuant to the dan-
gerous offender act, Minn. St. 609.16. We reject the contention
the trial court’s findings on this issue were clearly erroneous.
Defendant’s contention that the statute is void for vagueness was
not raised below and therefore must be deemed waived.
Affirmed.

ROBERT W. NYQUIST AND ANOTHER v.
THE TOWN OF CENTER.

251 N. W. 2d 695.

March 4, 1977—No. 46514.

William Lines, Gordon Rosenmeier, and John E. Simonett, for
appellants.

ee 267

Borden, Steinbauer, Borden & Rathke and Thomas R. Borden,
for respondent.

Heard before Rogosheske, Peterson, and MacLaughlin, JJ.,
and considered and decided by the court en banc.

ROGOSHESKE, JUSTICE.

Plaintiffs challenge the validity of a special property tax as-
sessment for road improvements that was levied by the town
board on their unplatted lots. The trial court upheld the action
of the board, finding that the special benefits were commensu-
rate with the assessment made. On appeal plaintiffs principally
question the sufficiency of the evidence to support the court’s
findings that the lots “are suitable for residential development”
and that as such their value has “been increased by a sum at
least equal to the amount assessed.” We hold that the evidence
adequately supports the finding as to suitability and a resulting
special benefit of some amount, but does not justify the amount
of the assessment levied. We therefore remand for a new trial
to redetermine the amount of special benefits conferred by the
road improvement.

In 1968 plaintiffs platted 57 lots of real estate located in the
Town of Center for residential development. Each lot was abut-
ted on its southern boundary by the Mississippi River. The plats
of these lots, known as Executive Acres and Executive Acres
First Addition, also provided for a 66-foot access road called
Executive Way. This road, which was originally of sand or
gravel construction, ran in an easterly direction from State
Highway No. 25 and abutted the northern boundary of each
platted lot before finally dead-ending at the river. The portion
of the road lying in the Town of Center is approximately 1 1/4
miles in length. About half of the lots situated south of the road
have now been sold, and 12 of the lots have houses built on them
in the $40,000 to $50,000 price range. Plaintiffs retain ownership
of the unsold platted lots, and in addition own 49.5 acres of un-
developed property, known as Government Lots 1 through 4,

268

located to the north of Executive Way. No buildings presently
stand on this property, and there was conflicting testimony as
to its future suitability for residential development.

In the fall of 1978, several lot owners requested the town to
improve Executive Way, and shortly thereafter the area resi-
dents overwhelmingly approved a special bond election issue to
pay for the road construction. The cost of the road improvements
that were subsequently made was $26,391. Acting upon the ad-
vice of a local realtor, the town board proposed assessing one-
half of the cost to the Government Lots north of the road and the
other half to the 57 platted lots to the south. A special assessment
hearing to formally resolve this matter was scheduled for Octo-
ber 2, 1974. Plaintiffs did not attend this hearing but rather
advised the board of their objections to the proposed assessment
through a letter written by their attorney. On October 2, the
board voted unanimously to assess the properties located to the
north and south of Executive Way equally.

Plaintiffs thereafter appealed this assessment, pursuant
to Minn. St. 429.081, on the principal grounds that the Govern-
ment Lots had received little if any special benefit as a result
of the road construction, and that in any event the board had
failed to prove a special benefit by showing an increase in market
value of the Government Lots after the improvement. The trial
court upheld the reasonableness of the assessments and further
held that plaintiffs had waived their objection by failing to
appear at the special assessment hearing.

Before considering plaintiffs’ specific assignments of error,
it should be observed that levying a special assessment is a legis-
lative act. Therefore, when an assessment is regularly made “it
is prima facie valid, and the burden rests upon the objector to
show its invalidity.” In re Improvement of Superior Street,
Duluth, 172 Minn. 554, 560, 216 N. W. 318, 320 (1927). This
presumption of validity may only be rebutted by the taxpayer
upon a clear showing that the assessment does not bear any
reasonable relationship to the value of special benefits. E. H.

ee 269
Willmus Prop. Ine. v. Village of New Brighton, 293 Minn. 356,
199 N. W. 2d 485 (1972). We have also recently held that a
special tax assessment may only be set aside on appeal when the
taxing authority acted in a clearly erroneous manner. Hartle v.
City of Glencoe, 303 Minn. 262, 226 N. W. 2d 914 (1975).

In reaching its decision to assess a portion of the road con-
struction costs to the Government Lots, the town board properly
considered the future use to which this property might be put.
See, Qvale v. City of Willmar, 223 Minn. 51, 25 N. W. 2d 699
(1946). Although the Government Lots are not presently zoned
for residential development, we find that the evidence justified
both the board and the trial court in concluding that at least some
residential development would be possible in the foreseeable
future, assuming that the property was rezoned.

While we have little difficulty in finding that the Government
Lots reaped some special benefit from the improvement of Ex-
ecutive Way, it is impossible for us to ascertain in the absence
of a market-value analysis by the town board whether the value
of such benefit was equal to half the construction cost. To de-
termine the value of a special benefit, the taxing authority must
consider “what increase, if any, there has been in the fair market
value of the benefited land.” City of St. Louis Park v. Engell,
283 Minn. 309, 316, 168 N. W. 2d 3, 8 (1969); accord, Gibbish
v. Village of Burnsville, 294 Minn. 318, 200 N. W. 2d 810 (1972).
This difference in market value should be computed by determin-
ing “what a willing buyer would pay a willing seller for the prop-
erty before, and then after, the improvement has been con-
structed.” Carlson-Lang Realty Co. v. City of Windom, 307 Minn.
368, 369, 240 N. W. 2d 517, 519 (1976).

In failing to base the special assessmerit made against the
Government Lots on a showing of change in market value result-
ing from the improvement of Executive Way, the town board
apparently misconstrued Minn. Const. art. 10, § 1, and Minn.
St. 429.061, subd. 1, which both require special assessments to
be levied “without regard to cash valuation.” The local realtor

270

hired by the board to assist in making the assessment testified
at trial that no consideration was ever given to market value.
The town clerk who attended the special assessment hearing on
October 2 related: “We did not go into market value because we
did not feel that that had anything to do with the assessment of
this property.” But the constitutional and statutory proscriptions
against basing special assessments on cash value are not intended
to obviate the need for making a market-value analysis of the
benefited property. As explained by Mr. Justice Mitchell many
years ago in State v. Reis, 88 Minn. 371, 38 N. W. 97 (1888), the
constitution merely prohibits assessing a double special-benefit
tax on one parcel of property with a cash value twice that of
another, when the special benefits received by both properties
are equal. We are therefore compelled to reverse and remand this
ease for a retrial and redetermination of special benefits upon
findings as to the market value of the Government Lots before
and after the improvement.

Finally, we are unpersuaded that plaintiffs waived their objec-
tion to the board’s special assessment by not attending the hear-
ing held on October 2, 1974. While it is true that in appropriate
cases an estoppel or waiver may arise when a taxpayer idly re-
fuses to raise his objections to a proposed special assessment at
the time of the hearing (see, State v. Johnson, 111 Minn. 255,
126 N. W. 1074 [1910]; 183A Dunnell, Dig. [8 ed.] § 6887a), we
believe that in the present case plaintiffs adequately apprised
the town board of their objections through the letter written by
their attorney, which allowed the board to “hear and pass upon
all objections to the proposed assessment, whether presented
orally or in writing.” Minn. St. 429.061, subd, 2.

Reversed and remanded for a new trial.

DONALD E. HASE, ADMINISTRATOR C.T.A. OF
ESTATE OF DONALD L. HASE, v. AMERICAN
GUARANTEE AND LIABILITY INSURANCE
COMPANY AND OTHERS.

251 N. W. 2d 638.

March 4, 1977—No. 46640,

Wegner, Wegner & Amerman and J. Derck Amerman, for ap-
pellant.

Simon, Schneider & Zimmerman and Charles S. Zimmerman,
for respondent insurance company.

Coulter, Nelson & Sullivan, Mark Sullivan, and Lyle R. Frevert,
for other respondents.

Heard before Rogosheske, Peterson, and Todd, JJ., and con-
sidered and decided by the court en banc.

PETERSON, JUSTICE.

Plaintiff’s decedent initiated an action against defendants,
alleging that the insurance coverage on certain commercial prop-
erty owned by decedent had mistakenly and negligently been
decreased, thus depriving decedent of an amount due him after

272

fire damaged the insured property. The trial court dismissed
plaintiff’s suit with prejudice after ruling that plaintiff's evi-
dence of negligence was inadmissible on the grounds that it was
hearsay and immaterial. Plaintiff appeals, seeking a reversal
of the evidentiary rulings and a new trial. We affirm.

The present controversy arose after a fire severely damaged
the premises of Reliable Cycle Co., a business owned by decedent
Donald L. Hase and insured under a policy issued by defendant
American Guarantee and Liability Insurance Company (Ameri-
ean Guarantee). Decedent had purchased the policy from de-
fendant James Nesser, an agent of defendant Midwest Area, Inc.,
an insurance sales office, American Guarantee paid decedent
$80,000 for damage to contents. That amount represents the
policy limit stated in a change endorsement attached to the
policy. Decedent brought suit for an additional amount of in-
surance. He claimed that Nesser had negligently erred in de-
creasing the contents coverage from $60,000 to $30,000, rather
than changing the inventory coverage as decedent had allegedly
requested prior to the fire.

Decedent died after initiating the suit. His son, Donald E.
Hase, was appointed administrator c.t.a. of the estate and the
parties agreed to substitution of the son as plaintiff.

At trial, plaintiff attempted to introduce testimony of certain
statements of the decedent. The court ruled that these statements
were hearsay and inadmissible. Plaintiff also sought to introduce
a copy of the insurance policy previous to the one in effect at the
time of the fire. According to plaintiff, the expired insurance
policy had an increasing-and-decreasing inventory provision ap-
propriate to the seasonal nature of the motorcycle sales business,
while the new policy had no such provision for fluctuating
coverage. Plaintiff argued that this is “circumstantial evidence
of a reason for Mr. Hase to change the inventory rather than the
contents.” The trial court ruled the expired policy immaterial
in the absence of some proof that the decedent had contracted

ee 278

for the same terms in the second policy as in the first, or had
otherwise relied upon it.

At oral argument, plaintiff conceded that the evidence of the
expired policy standing alone, without the evidence of decedent’s
statements, would not support a verdict for plaintiff. Thus the
dispositive issue presented is whether the trial court erred in
excluding as hearsay the statements of decedent.

In his offer of proof, plaintiff stated:

«x # * _TI]f Mr. Kottke [an employee of decedent] were
allowed to testify to the jury, he would state in substance that
after the fire and until talking to Mr. Nesser when Mr. Nesser
returned from his fishing trip, which would be within several
days subsequent to July 12, 1973 [the date of the fire], Mr. Hase
expressed no emotion over the insurance consequences of the fire.
Upon talking to Mr. Nesser, but not in Mr. Kottke’s presence,
he became quite angry and upset and told Mr. Kottke that he had
ordered a change in the policy but that Mr. Nesser had made a
mistake, and instead of changing the increasing and declining
inventory coverage he reduced the contents coverage instead.”
Plaintiff made a second offer of proof of almost identical testi-
mony from decedent’s two sons:

“If Donald Hase and Daniel Hase were allowed to testify to
the jury, they would state in substance that at approximately
the same time after the fire and two or three days after talking
to Mr. Nesser, the decedent Mr. Hase became quite angry, and
told them on at least one occasion each that Mr. Nesser had made
a mistake and had reduced the wrong coverage; and that he had
not received a copy of the change order, and that if he had done
so he would have corrected it immediately to apply to the inven-
tory.”

Plaintiff argues that this testimony should be admitted under
any one of three exceptions to the hearsay rule: 1) excited ut-
terance or res gestae; 2) state of mind; 3) “catch-all” exception,
Rules 8038 (24) and 804(b)(5), Federal Rules of Evidence.

274 es

1. In Beebe v. Kleidon, 242 Minn. 521, 526, 65 N. W. 2d 614,
617 (1954), we defined the elements of the res gestae or excited
utterance exception:

«* * + To come within this exception to the hearsay rule, the
declaration must follow a startling occasion; it must be made
before there is time for the declarant to reflect upon the impacts
of the statement; and it must relate to the startling occasion.”

The essence of the excepted statements is spontaneity.

«+ * * The theory of the res gestae rule is that utterances,
accompanying or forming part of a transaction or occurrence
spoken spontaneously in response to nervous stimulation pro-
duced by the transaction or occurrence, are admissible to explain
or characterize it. Although such statements are hearsay, they
derive their sanction as evidence from the fact that the immedi-
ate impact of the circumstances of their utterance eliminates
intention and opportunity for fabrication to such an extent as
to be a reasonable substitute for an oath.” Fenton v. Minneapolis
Street Railway Co. 252 Minn. 75, 82, 89 N. W. 2d 404, 410
(1958).

Indicia of spontaneity include the lapse of time between the
startling occurrence and the statement; the self-serving or in-
criminating nature of the statement; whether the statement was
made in response to a question; the motive and opportunity for
fabrication; and the natural excitement of the declarant. Beebe
v. Kleidon, 242 Minn. 521, 526, 65 N. W. 2d 614, 618. The issue
here is whether, assuming a conversation can be a “startling oc-
casion,”? decedent’s response to it was spontaneous, thereby
providing guarantees of its trustworthiness and eliminating the
need for the hearsay rule. The determination of whether an
exception is established is left largely within the sound discretion

1 Most cases involve startling occasions such as fires or automobile
accidents. In this case, decedent’s alleged statements were not pro-
voked by the fact of the fire but by defendant Nesser’s statement that
decedent’s fire insurance coverage was limited to $30,000.

— 275

of the trial court. Beebe v. Kleidon, supra; Fenton v. Minne-
apolis Street Railway Co. supra.

It is not clear whether the testimony would be that decedent
accused Nesser of a mistake* and then repeated the accusation
to Kottke and 2 or 3 days later to his sons or whether the accusa-
tion was first made to Kottke. In either event, the statement to
his sons was repetitious which is the antithesis of spontaneous.
The repetitious nature of the statement and the lapse of time
between the statement and the alleged startling occurrence, to
say nothing of the self-serving nature? of the statement, support
the conclusion that the statement was not an “excited utterance.”

As for Kottke’s testimony, decedent allegedly spoke to him
after speaking to Nesser and out of Nesser’s presence. No time
frame was stated in the offer of proof although in plaintiff's
brief it alleges “immediately after being so informed by Mr.
Nesser, Mr. Hase became angry and enraged by Mr. Nesser’s
mistake and promptly informed the employee, Mr. Kottke, and
his two sons.”

Given the lack of precision as to time lapse, the nature of the
startling event, the motive and opportunity for fabrication,* and
the self-serving nature of the statement, we hold that the trial
court did not abuse its discretion in refusing to admit this state-
ment under the rubric of the res gestae exception.

2. Plaintiff would characterize as declarations of state of
mind statements made by decedent while “angry and upset.”
Decedent’s alleged assertions that he ordered a change but that
Nesser changed the wrong coverage are not statements of dece-
dent’s then existing mental, emotional, or physical condition.

2Nesser denied that such an accusation was made.

8 The fact that a statement is self-serving is not alone reason to re-
fuse to allow it in evidence under an exception to the hearsay rule.
Fenton v. Minneapolis Street Railway Co. 252 Minn. 75, 89 N. W. 2d 404
(1958).

4Contrary to plaintiff's assertion, the fact that decedent did not ex-
pect to die before trial but fully expected to be able to testify does not
eliminate all motive to fabricate.

276 EE
They are, rather, statements explaining why decedent was angry
and upset. The exception for declarations of state of mind does
not embrace statements made to explain the cause of the mental
or emotional condition. McCormick, Evidence, § 291, p. 690;
§ 294, p. 696.

Plaintiff cites Scott v. Prudential Ins. Co. 203 Minn. 547, 282
N. W. 467 (1938), and Mathews v. Great Northern Ry. Co. 81
Minn. 363, 84 N. W. 101 (1900), in support of his argument.
Those cases involve statements of intent admitted for the light
they shed upon events which occurred subsequent to the time the
statements of intent were made. Plaintiff’s proffered testimony
is not of this type. We hold the “state of mind” exception in-
applicable to the facts of this case.

3. Plaintiff would have us in this case adopt and apply the
“catch-all” exception of Rules 803(24) and 804(b) (5), Federal
Rules of Evidence.® Such a rule has not been adopted in this
state,° and we decline to forecast either its adoption or, if
adopted, its application with respect to the “equivalent circum-
stantial guarantees of trustworthiness” asserted in this case by
plaintiff.

Affirmed.

5 Rules 803(24) and 804(b) (5), Federal Rules of Evidence, provide:
“Other exceptions.—A statement not specifically covered by any of the
foregoing exceptions but having equivalent circumstantial guarantees
of trustworthiness, if the court determines that (A) the statement is
offered as evidence of a material fact; (B) the statement is more proba-
tive on the point for which it is offered than any other evidence which
the proponent can procure through reasonable efforts; and (C) the gen-
eral purposes of these rules and interests of justice will best be served
by admission of the statement into evidence * * *.”

6 Rules of Evidence for this state are presently under study, with a
hearing upon their adoption scheduled for March 17, 1977.

277

CITY OF CLOQUET v. CLOQUET SAND AND
GRAVEL, INC., AND ANOTHER.

251 N. W. 2d 642.

March 4, 1977—No. 46517.

Harper, Eaton, Gustafson & Peterson and James Harper, for
appellants.

Newby & Dodge, Harry L. Newby, Jr., Fryberger, Buchanan,
Smith, Sanford & Frederick, and Harold A. Frederick, for re-
spondent.

Heard before Rogosheske, Peterson, and Kelly, JJ., and con-
sidered and decided by the court en banc.

PETERSON, JUSTICE.

Plaintiff, City of Cloquet, is a municipal corporation. De-
fendant Cloquet Sand and Gravel, Inc., is a Minnesota corpora~
tion, and the successor in interest of defendant Cloquet Ready
Mix, Inc. At the time of trial, the former defendant was in ex-
clusive control of approximately 40 acres of land in Carlton
County on which it operated a gravel pit, from which it removed
gravel and processed it on the premises. The 40 acres are located

278 a

in an, area zoned for residential use. Defendant has never secured
a “temporary excavation conditional use permit” to conduct its
commercial venture as required by Cloquet Zoning Ordinance,
§ 15. Plaintiff brought suit to enjoin defendant’s business which
allegedly was conducted in violation of the zoning ordinance, and
to have certain aspects of defendant’s operation declared to be
a nuisance and to require their abatement.

The trial court held that defendant need comply with the con-
ditional-use-permit requirement only when the city of Cloquet
began uniform enforcement of the zoning ordinance. Inde-
pendent of the zoning regulations, the court held that several of
the defendant’s activities, including the excavation of a hillside
which resulted in a vertical drop-off of 75 to 90 feet, constituted
a nuisance. The court ordered defendant to erect a fence and to
submit plans to the court for restoring reasonable contours to
the land once the gravel removal ceased. With some additional
limitations, the court permitted defendant to continue its opera-
tion, provided that defendant first post a performance bond for
$25,000 to ensure compliance with the order. Until such time as
the bond was posted, the court ordered all operations to cease,
except that defendant was permitted to remove any plant equip-
ment from its property. Defendant appeals from the judgment
entered, challenging only one narrow provision. It argues that
the court abused its discretion in prohibiting defendant, pending
posting of the performance bond, from removing from the prem-
ises sand and gravel which had already been processed. We
affirm.

Defendant specifies several reasons for its assertion that the
court, in this one particular, abused its discretion. It asserts that
since the court did not find that removal of the sand and gravel
was itself a nuisance, the injunction exceeded the scope of the
pleadings, evidence, and findings, and curtailed defendant’s ac-
tivities more than was reasonably necessary to give plaintiff the
relief to which it was entitled. In addition, it argues that the
court arbitrarily distingusihed between processed sand and

ee 279

gravel and other personal property, namely plant equipment, in
allowing defendant to remove the latter before posting the per-
formance bond, and that the court improperly balanced the
equities, ignoring plaintiff’s delay in enforcing the code and its
unclean hands in selectively enforcing it.

A court of equity has broad discretion in fashioning remedies.
In Beliveau v. Beliveau, 217 Minn. 235, 245, 14 N. W. 2d 360, 366
(1944), we stated:

“* * * A court of equity has the power to adapt its decree to
the exigencies of each particular case so as to accomplish justice.
It is traditional and characteristic of equity that it possesses the
flexibility and expansiveness to invent new remedies or modify
old ones to meet the requirements of every case and to satisfy
the needs of a progressive social condition.”

The standard of review in nuisance cases and others involving
equitable relief is whether the trial court has abused its discre-
tion. Holmberg v. Bergin, 285 Minn. 250, 172 N. ‘W. 2d 739
(1969); Robinson v. Westman, 224 Minn. 105, 29 N. W. 2d 1,
174 A. L. R. 746 (1947). Defendant’s arguments merit little dis-
cussion.

The fact that the removal of processed sand and gravel does
not itself constitute a nuisance does not preclude the court from
temporarily prohibiting that activity. Such removal is part of
defendant’s over-all operation, other parts of which do constitute
a nuisance. The prohibition is a reasonable precaution taken to
ensure compliance with the court’s order to abate the related
nuisance.

The court allowed defendant to remove its machinery and of-
fice equipment from the premises. Defendant argued at the
supplementary hearing for interpretation of the order that—

1 Defendant also argues that the performance bond requirement con-
stitutes a “confiscatory taking of property.” Because defendant pro-
vides minimal explanation of this contention and cites no supporting
authority, we need not consider it.

280 Es

«® * * none of the machinery has been touched. It may now
be completely destroyed by frost and freezing because we could
not drain water. We could not do anything to protect the equip-
ment.”

The stockpiled sand and gravel is not threatened by such exi-
gencies, and, therefore, for the court to allow removal of the one
but not the other is not to draw an arbitrary and capricious dis-
tinction. In fashioning equitable remedies appropriate to the
facts of a particular case, a trial court need not treat all personal
property in the same way.

The court explicitly considered plaintiff’s delay in bringing
suit by refusing to require that defendant immediately comply
with the zoning ordinance.? That the court did not also allow
defendant to remove its stockpiled material does not mandate
a conclusion that the court reached an inequitable balance.
Furthermore, to prevail on a defense of laches, prejudice must
be shown. Lemmer v. Batzli Electric Co. 267 Minn. 8, 15, 125 N.
W. 2d 434, 4839 (1963). Defendant has shown none. As for de-
fendant’s selective prosecution argument, the record is void of
any supporting facts. .

The requirement of a performance bond before the resumption
of operations poses minimal hardship to defendant. Defendant’s
production of sand and gravel has resulted in a nuisance. De-
fendant does not dispute that finding. Defendant has profited
at the expense of the community in which its operation is located.
It was reasonable for the court to prohibit defendant from
further profitmaking during the short time, and for the small

2 The court noted in its memorandum, “For the period from 1968 until
the present, gravel has been removed from the Bank and processed on
the lower portion of the Koski Forty. Whether cast in the light of equit-
able estoppel or laches, the Court has accordingly saw fit to permit that
operation to continue on a limited basis pending uniform enforcement
of Section 15 of the new ordinance.”

De 281

expense, presumably necessary to secure a performance bond
to ensure abatement of the nuisance.
Affirmed.
Mr. JUSTICE YETKA took no part in the consideration or deci-
sion of this case.
Es

STATE, DEPARTMENT OF PUBLIC SAFETY, v.
LAWRENCE ROMAN KNEISL.

251 N. W. 2d 645.

March 4, 1977—No. 46789.

282 ee

Warren Spamnaus, Attorney General, and Joel A. Waine, Spe-
cial Assistant Attorney General, for appellant.

Bradford, Kennedy & Nervig and Charles R. Kennedy, for
respondent.

Heard before Kelly, Todd, and Winton, JJ., and considered
and decided by the court en banc.

Topp, JUSTICE.

Lawrence Roman Kneisl was arrested by a Wadena policeman
for operating a motor vehicle while under the influence of an
alcoholic beverage, Minn. St. 169.121, and for other traffic of-
fenses. Kneis] was transported to the county jail in Wadena
where, after his arrival, he telephoned his attorney. The attorney
appeared at the jail approximately 1/2 hour later and requested
a private consultation with his client. After this request was
denied, Kneisl refused to take any of the chemical tests provided
for in the implied-consent statute, Minn. St. 169.123. The jury
returned a verdict that Kneisl did not have reasonable grounds
to refuse the testing. The trial court, in response to a motion for
a directed verdict which had been taken under advisement,
vacated the jury verdict and held that Kneisl had reasonable
grounds to refuse the testing as a matter of law. We affirm.

At the commencement of the trial, the parties stipulated that
the only issue before the court was whether reasonable grounds
were present for Kneis] to refuse to take the implied-consent
tests. The evidence discloses that the arresting officer first
offered to administer the implied-consent tests to Kneisl in the
squad car on the way to the jail. Upon Kneisl’s arrival at the
jail at approximately 8:15 p. m., after his initial request to tele-
phone his attorney had been refused, he was ultimately afforded
an. opportunity to do so.

After Kneisl completed the telephone call to his attorney, the
arresting officer read the implied-consent advisory to Kneisl,
who indicated confusion concerning his rights. He offered to take
a breath test, which could not be administered because the

ee 288

breathalyzer machine was out of order. The arresting officer
then began to fill out the implied-consent advisory form, reading
the questions to Kneis] and recording his answers. The officer
testified that while reading the form, he avoided references to
the breath test, and in two of the four places on the form where
the word “breath” appears, he crossed it out. There is a conflict
in testimony as to whether the form had been completed when
Kneisl’s attorney arrived at the jail. However, we do not regard
this as a crucial factor. It is conceded that if the test had been
administered after the attorney had arrived and after he had
been allowed a short conference with his client, the validity of
the results would not be impaired.

Kneisl testified that the following took place when his attorney
arrived at the jail:

“Q. All right. Then what happened when Mr. Bradford ap-
peared in the room now, were you and Officer Young —

“A, Well, he asked the officer what — some questions about
what I had done or something, and Officer Young had told him,
and that we were on this Implied Consent Advisory — or Law
here now, and Mr. Bradford said, ‘Well, could I speak to him for
just a moment in private,’ you know, and Officer Young said,
‘No, you can’t do that.’ And well, he said, ‘Since when can’t you
talk to your lawyer in private?’ And the one said, ‘Well, it’s jail
policy, you can’t do that any more.’

“Q. Who said that?

“A. That had to be Randy Hanson.

“Q. Who was still in the room?

“A. Yes. He had to come into the room because it was jail
policy, he said. And Mr. Bradford just kind of laughed. He said
he never heard of anything like that, you know, where you can’t
talk to your lawyer in private.

“Q. Now, did Mr. Bradford make the statement he wanted
to talk to you for a minute?

“A. Yes.

“Q. Was Officer Young there?

284 a

“A. Yes.

“Q. In the room?

“A. Yup. There was Officer Young and the reserve officer,
Jerry Anderson and one more.

ek oe oe €

“Q. Now, continue then, pick it up from the point where you
were told then it was jail policy that you could not talk to your
lawyer alone; what happened next?

“A. At that point when — when Ray was told that he
couldn’t — it was jail policy, then he said, ‘You will just have
to go it yourself, try to understand it.’ And so, L just — right
then I just refused to take any test because I couldn’t talk to my
lawyer alone, Mr. Bradford in private, because I didn’t under-
stand any of this. I didn’t know about any Implied Consent Law.”

Kneisl’s version of what transpired after his attorney’s arrival
at the jail is supported by the testimony of the arresting officer.
The officer testified that, while Kneisl was in his custody, he
would not permit a private consultation between Kneisl and his
attorney because he did not “feel that he had the right to talk
to him at that time.”

At the close of the state’s case, a motion for directed verdict
was made by Kneisl’s counsel. The court took the motion under
advisement. The matter was submitted to the jury which found
that Kneis] did not have reasonable grounds to refuse the im-
plied-consent tests. Thereafter, the trial court, acting on the
motion for directed verdict, held that Kneis] had reasonable
grounds to refuse testing as a matter of law and set aside the
jury verdict. Judgment was entered denying revocation of
Kneisl’s driver’s license. The state filed this appeal following a
denial of its motion to vacate the judgment and reinstate the
jury verdict.

i We are presented with the application in an implied-con-
sent case of Minn. St. 481.10 which provides:

“All officers or persons having in their custody a person re-
strained of his liberty upon any charge or cause alleged, except

De 285
in cases where imminent danger of escape exists, shall admit any
resident attorney retained by or in behalf of the person re-
strained, or whom he may desire to consult, to a private inter-
view at the place of custody. Such custodians, upon request of
the person restrained, as soon as practicable, and before other
proceedings shall be had, shall notify any attorney residing in
the county of the request for a consultation with him. Every
officer or person who shall violate any provision of this section
shall be guilty of a misdemeanor and, in addition to the punish-
ment prescribed therefor shall forfeit $100 to the person ag-
grieved, to be recovered in a civil action.” (Italics supplied.)

Recently, in Prideaux v. State, Dept. of Public Safety, 310
Minn. 405, 247 N. W. 2d 385 (1976), we recognized a limited
right to counsel under § 481.10 when a person is arrested for
allegedly violating § 169.121. We stated:

“We have referred above to a limited right to counsel. Because
of the importance of uniformity and clarity in implied-consent
procedures, we would indicate specifically the nature of the right
and its limitations. Consistent with this opinion, any person who
is required to decide whether he will submit to a chemical test
in accordance with § 169.123 shall have the right to consult with
a lawyer of his own choosing before making that decision, pro-
vided that such a consultation does not unreasonably delay the
administration of the test. The person must be informed of this
right, and police officers must assist in its vindication. The right
to counsel will be considered vindicated if the person is provided
with a telephone prior to testing and given a reasonable time to
contact and talk with counsel. If counsel cannot be contacted
within a reasonable time, the person may be required to make
a decision regarding testing in the absence of counsel.” (310:
Minn. 421, 247 N. W. 2d 394.)

In this case a telephone call was allowed but a private confer-
ence with the attorney was prohibited at the jail. It is undisputed
that the attorney arrived promptly at the jail and that a reason-

286 —
able time for a conference with his client would not have affected
the validity of any test administered thereafter. Under these
circumstances, it would be a sham to permit the telephone call
and then deny the arrested person an opportunity to consult with
his attorney at the jail. The arrested person assumes the risk that
his attorney will not appear promptly enough so as to satisfy the
reasonable time requirements of Prideaux. However, after per-
mitting the arrested person to telephone his attorney, the police
may continue with their routine processing of the individual and
the implied-consent form. If the attorney arrives at the jail with-
in a reasonable time so as to not affect the validity of the implied-
consent testing, a private consultation between attorney and
client must be allowed. After the private conference the arrested
person must again be afforded the opportunity to submit to the
implied-consent testing.

Mi Minn. St. 481.10 provides for a private interview at the
place of custody. In State, Dept. of Public Safety, v. Held, 311
Minn. 74, 76, 246 N. W. 2d 863, 864 (1976), in discussing what
constitutes a private telephone conversation, we said:

«* * * The issue is whether the police had a further obliga-
tion to permit the call to be made from a private booth or room.
Bearing in mind that many police departments may not have
private phone booths or rooms suitable for such use, and the
potential security problems involved, we decline to impose such
a requirement. We believe that the driver’s rights are sufficient-
ly safeguarded by a rule which forbids the use in evidence of any
statements made by defendant to his counsel over the telephone
which are overheard by police. Such a rule fully satisfies the
privacy requirement of Minn. St. 481.10, the provision on which
the Prideaux decision was based.”

We apply the same rationale to a private interview. If security
permits and a private room is available, it should be provided
to counsel. If such a facility is unavailable or impermissible
under the circumstances, counsel should be allowed to confer

ee 287

with his client out of the earshot of others in the room. None of
this conversation between the attorney and his client can be used
against the defendant, no matter how obtained, unless the de-
fendant agrees to the introduction of such evidence. We regard
this as a practical solution to the statutorily imposed require-
ments of privacy.

We note that the trial court in its memorandum accompanying
its order perceptively anticipated our decision in Prideaux and
reached the conclusion with which we are in accord. The trial
court stated:

“The statute was raised in this case and it should be decided.
The statute states that the officer shall admit any resident at-
torney to a private interview at the place of custody. The only
exception made is in cases where imminent danger of escape
exists. This was not the case here. Nor was there any possibility
in this case that the results of the test would be prejudiced by
any delay. The lawyer, it appears, was in the stationhouse and
he told the officer that the consultation would only take one or
two minutes. The evidence shows clearly that the lawyer was pre-
vented by the officer from having a private interview with his
client. Such an action was not only arbitrary and unreasonable,
since such a consultation would clearly have had no effect on the
validity of the test, but it was also a violation of M. S. A. 481.10
which requires a ‘private interview’.

sok ok ee

«* * * TWhere the lawyer is present as he was in this case
and where no prejudice to the test will result M. S. A. 481.10
should be applicable and complied with fully. The statute was
not complied with here and that should give the individual in-
volved reasonable grounds for refusing to take the test.”

Affirmed.

po

288 as

HENRY GESS, INDIVIDUALLY AND d.b.a.
HENRY GESS WELL COMPANY,
v. MICHAEL R. SILL.

251 N. W. 2d 650.

March 4, 1977—No. 46676.

O. P. Lund, for appellant.
Leonard, Street & Deinard and Steven D. DeRuyter, for re-
spondent.

MACLAUGHLIN, JUSTICE.
Plaintiff, Henry Gess, pursuant to an oral contract with de-
fendant, Michael R. Sill, agreed to install a new well at de-

a 289

fendant’s residence in Deephaven, Minnesota. Upon completion
of the well defendant refused payment. Plaintiff brought this
action alleging that defendant owed him $1,305 for the installa-
tion of the well, and defendant counterclaimed asserting that
the well was of no value to him because, among other things,
it had been drilled at the improper location. The trial court
found that plaintiff had materially and substantially breached
the contract, made no award of damages to plaintiff, and a-
warded defendant $1,305 on his counterclaim. We affirm as to the
breach of contract but reverse and remand on the question of
the damages awarded to defendant.

The trial court found that the well as installed by plaintiff was
not in accord with the agreement. Contrary to the agreement,
the well was drilled approximately 10: feet from defendant’s
home and about 12 inches from the driveway which passes in
front of his residence. Furthermore, contrary to the agreement,
the top of the new well extends 18 inches above the ground, is.
an eyesore, and is a potential cause of injury to persons and
vehicles. The trial court also found that the parties had agreed
upon the use of new materials in the installation of the well but
that plaintiff had in fact used 42 feet of used drop pipe taken
from plaintiff’s old well and 110 feet of old electrical wiring that
had been spliced together in at least 15 places.

The trial court concluded that plaintiff intentionally and
knowingly breached the contract and that the deviations in per-
formance were so material that defendant did not receive sub-
stantially what he had bargained for. Based upon the foregoing,
the trial court awarded nothing to plaintiff and awarded judg-
ment for defendant on his counterclaim “in the amount of
$1,305.00, which is the cost of performing the contract as agreed
to between the parties * * *.”

i There is sufficient evidence to support the trial court’s
determination that the well was neither drilled in the proper
Jocation nor installed as the parties had agreed. The evidence

290 a

also supports the trial court’s conclusions that plaintiff's instal-
lation of the well was “an intentional deviation [from the con-
tract] without approval or knowledge of the defendant,” and
that the defects and deviations in plaintiff’s performance were
so material that defendant did not receive substantially what
he had bargained for.

In Ylijarvi v. Brockphaler, 218 Minn. 885, 390, 7 N. W. 2d 314,
818 (1942), a case involving the drilling of a well, we discussed.
the contractor’s duty of substantial performance in building and
construction contracts:

«* + * For present purposes, it is sufficient to say that sub-
stantial performance means performance of all the -essentials
necessary to the full accomplishment of the purposes for which
the thing contracted for has been constructed, except for some
slight and unintentional defects which can be readily remedied
or for which an allowance covering the cost of remedying the
same can be made from the contract price. Deviations or lack
of performance which are either intentional or so material that
the owner does not get substantially that for which he bargained
are not permissible.”

In the Ylijarvi case we established that a contractor may not
recover when he is guilty of a substantial deviation from the
contract or when his intentional deviation is so extreme that the
owner does not get substantially that for which he bargained.
Because the evidence supports the trial court’s findings and con-
clusions, we hold that there was no error in denying recovery
to plaintiff.

IB The trial court awarded the contract price of $1,305 to
defendant on his counterclaim and denied recovery to plaintiff,
with the result that defendant would obtain a new well at no
cost. Since defendant has paid plaintiff nothing for the well,
this will result in his unjust enrichment.

The applicable rule of damages is found in Restatement, Con-
tracts, § 346, which provides in part:

be 291

“(1) For a breach by one who has contracted to construct
a specified product, the other party can get judgment for com-
pensatory damages for all unavoidable harm that the builder had
reason to foresee when the contract was made, less such part of
the contract price as has not been paid and is not still pay-
able * * *.”

The comment to Subsection (1a) further explains that “[s]atis-
faction for his harm is made either by giving him a sum of money
sufficient to produce the physical product contracted for or by
giving him the exchange value that that product would have had
if it had been constructed.” Regardless of the measure of
damages used, the owner “must deduct from the amount of loss
thus ascertained the amount, if any, remaining unpaid upon the
contract price.” McCormick, Damages § 168, p. 649. See, general-
ly, Dobbs, Remedies §§ 12.21 and 12.22.

Based upon the facts of this case, defendant is entitled to the
sum of money required for installing the well contracted for, plus
any reasonably foreseeable consequential damages resulting from
the breach. From that amount, however, must be deducted the
contract price which defendant was to have paid plaintiff for
the nonconforming well. Defendant cannot have his well without
paying for it. The correct amount of damages should be ascer-
tained upon remand.

Affirmed in part, and reversed and remanded in part.

1 An example of permissible consequential damages would be the rea-
sonable expenses incurred in cutting off or otherwise removing the un-
sightly pipe which protrudes above the ground from the well and in
replacing the sod to its former condition. Defendant claims diminution
in the value of his residence as a result of the defective installation;
however, it is difficult to understand how diminution could occur if a
new well were installed and the defective well were effectively re-
moved from sight.

STANLEY TEEMAN v. ROGER JUREK. 4
251 N, W. 2d 698. ¢

March 4, 1977—No. 46644.

Johnson, Gubbe & Associates and Robert G. Gubbe, for appel-
lant.

Norton, Jergens, Hebert, Cass & Jepsen and W. E. Jepsen, for
respondent,

Heard before Kelly, Todd, and Winton, JJ., and considered
and decided by the court en banc.

be 293

CRANE WINTON, JUSTICE.*

. This case comes here upon an appeal from a judgment entered
upon findings of fact, conclusions of law, and order for judgment
made in favor of defendant-respondent following a trial to the
court sitting without a jury in an action to recover damages for
breach of contract for the sale of soybeans by plaintiff to de-
fendant and the latter’s counterclaim against plaintiff-appellant
for breach of contract for the sale of corn. At the beginning of
the trial the parties stipulated that defendant received from
plaintiff soybeans valued at $8,544.20 for which defendant has
not paid plaintiff. For the reasons hereafter stated, the judgment
is affirmed.

In the spring of 1973, Stanley Teeman and Roger Jurek made
an agreement by the terms of which the former undertook to sell
to the latter 48,000 bushels of corn to be delivered in installments
at per bushel prices as follows:

Bushels Delivery Date Price Contract Price
10,000 June 1973 $1.47 per bu. $14,700:
18,000 August 1973 $1.49 per bu. $26,820
20,000 February 1974 $1.63 per bu. $32,600
The parties made their bargain with knowledge that defendant
intended to resell the corn to Farmers Union Grain Terminal As-
sociation (GTA) and that the bushel price for each installment
was set in relation to what GTA was then paying for future
delivery of corn in the months indicated. The agreement also pro-
vided that defendant would receive from plaintiff the sum of 10
cents per bushel for hauling the corn from plaintiff’s farm at
Harris, Minnesota, to GTA’s terminal elevator at Superior,
Wisconsin. That figure included a 7-cent factor for costs and 3
cents for profit.
After he reached the agreement to buy plaintiff’s corn, Jurek
signed a contract to sell the corn purchased from plaintiff to

*Acting as Justice of the Supreme Court by appointment pursuant
to Minn. Const. art. 6, § 2, and Minn. St. 2.724, subd. 2.

294

GTA, and late in June 1973 he begain hauling the first install-
ment to GTA’s Superior terminal. GTA made payment based on
the weight of the delivered corn as determined on scales in-
spected by Federal and state grain inspectors. Grading deduc-
tions, however, were made from amounts otherwise due for
damaged corn, foreign material, and for corn weighing less than
54 pounds per bushel.

At plaintiffs request, defendant caused some, but not all, the
corn loads to be weighed at Pine City, Minnesota, as a cross-
check.1 Although the accuracy of the procedure followed in mak-
ing the eross-check is disputed, some shortages in scale weights
at the Superior terminal were indicated.”

In July 1978, Jurek paid Teeman $18,498.59 for corn delivered
to the GTA terminal in June 1978. The payment reflected a grad-
ing deduction amounting to $135 to $140 and a claimed ‘weight
shortage totaling $75 to $80 on the seven loads cross-checked at
Pine City. Because of plaintiff's complaints about the grading
deductions and the claimed discrepancies in scale weights, GTA
agreed to cancel the grading deductions, although it did not re-
vise its evaluation of the delivered corn, and to make payment
for the amount of the deductions for grading and of the claimed
weight discrepancy. It further agreed to allow future corn ship-
ments to be weighed at any one of three other elevators. Those
commitments were communicated to plaintiff in August 1973.

In mid-August 1973, GTA delivered a check in part payment
in accordance with its commitment to Jurek, who in turn en-
dorsed and gave it to Teeman. The defendant subsequently re-
ceived from GTA a second check, but instead of endorsing and
delivering that check to the plaintiff, the defendant held and
ultimately cashed it.

1 Seven of the eleven loads hauled during June 1973 were weighed at
Pine City.

2 Load-weight obviously was a matter of importance, because it was
the basis on which the parties determined the amounts Jurek was obli-
gated to pay Teeman. 7

Es 295

Notwithstanding GTA’s commitments, Teeman withheld de-
livery of corn in August. Under date of September 14, 1973, he
wrote a letter to GTA with a copy to defendant in which he stated
in part:

“In my previous letter to you on August 8th, I stated that I
would not deliver any more corn to Superior and take the losses
I have taken on every load that had a check weight on it. This
still stands with me, if there is not going to be any other adjust-
ments than what has been made, there is not going to be any
more corn. In fact the 18,000 bu. is now gone and there is also
another contract for 20,000 bu. for February 1974 delivery that
will not be delivered either under the conditions I have ex-
perienced with delivery of corn to Superior up to this time.”

In fact, plaintiff disposed of his corn on the Minneapolis open
market, and, consequently, there were no further deliveries of
corn to defendant who in turn made none to GTA.

Thereafter, Jurek settled his. obligation to deliver corn in
August to GTA at a price of $1.49 per bushel for the difference
between the contract price and of the market price of $2.20 per
bushel on the date of cancellation or default (August 31, 1973),
or 71 cents per bushel. That amounted, the trial court found, to
$12,780. The February 1974 default he settled at 20 cents per
bushel for a total of $4,000.

In November 1973, the parties here agreed to a second contract
for the sale by plaintiff to defendant of a quantity of soybeans
for resale and delivery to Honeymead Corporation. The beans
were delivered and payment made by Honeymead to the de-
fendant.

The plaintiff brought suit against defendant to recover the
amount due him on the soybean contract when the defendant
failed to make payment. The defendant counterclaimed to recover
damages which he sustained by reason of the plaintiff’s default
on the corn contract.

At the opening of the trial the parties stipulated that de-
fendant owed plaintiff $8,544.20 on the soybean contract. Follow-

296 a

ing the close of the evidence, the trial judge made findings of
fact, conclusions of law, and an order granting judgment for de-
fendant against plaintiff in the sum of $8,675.80. The trial court
found, among other things, that plaintiff had questioned the
adjustments in the ultimate price for the corn delivered in June
1978, made for test weight, foreign material, and damage, and
that he also questioned the correctness of the weights of corn
delivered to Superior. The court further found that defendant
had obtained assurances from GTA that it would reimburse
plaintiff for the deductions made and that if plaintiff was not
satisfied with the weighing procedure at Superior, the remaining
two deliveries could be made to another elevator. The court con-
cluded that plaintiff was not justified in withholding delivery
of the 88,000 bushels of corn and assessed total damages to
defendant of $17,220 against which he offset the $8,544.20 owed
by defendant to plaintiff for the soybeans. Whether the evidence
and the law support the trial court’s order for judgment is the
question to be decided here.

The contract between plaintiff and defendant was one for the
sale of goods and, therefore, is governed by the Uniform Com-
mercial Code—Sales, Minn. St. 336.2—101 to 336.2—725.° Plain-
tiff contends that under the facts and the applicable law he was
entitled to withhold delivery of the corn. The trial court specifi-
cally concluded that he was not justified in doing so. Plaintiff’s
second contention is that the trial court erred in implicitly find-
ing that defendant did not repudiate the contract by retaining
GTA’s second refund check. Finally, plaintiff maintains that the
trial court incorrectly included defendant’s settlement with GTA
in the computation of damages.

3 Minn. St. 336.2—102 provides in part: “Unless the context otherwise
requires, this article applies to transactions in goods * * *.”

Minn. St. 336.2—105(1) states in part: “ ‘Goods’ means all things (in-
eluding specially manufactured goods) which are moveable at the time
of identification to the contract for sale other than the money in which
the price is to be paid, investment securities (article 8) and things in
action.”

Le 297

IIs the evidence sufficient to sustain the trial court’s find-
ing that plaintiff was not entitled to withhold delivery under
Minn. St. 336.2—609? That statute, in so far as applicable here,
provides:

“(1) A contract for sale imposes an obligation on each party
that the other’s expectation of receiving due performance will
not be impaired. When reasonable grounds for insecurity arise
with respect to the performance of either party the other may
in writing demand adequate assurance of due performance and
until he receives such assurance may if commercially reasonable
suspend any performance for which he has not already received
the agreed return.

“(2) Between merchants the reasonableness of grounds for
insecurity and the adequacy of any assurance offered shall be
determined according to commercial standards.

koe ok ok OF

“(4) After receipt of a justified demand failure to provide
within a reasonable time not exceeding 30 days such assurance
of due performance as is adequate under the circumstances of
the particular case is a repudiation of the contract.”

That Teeman as seller had reasonable grounds for insecurity
seems by no means clear from the evidence. To be sure, he com-
plained about short weight and grading discounts, but whatever
the merit of those complaints the evidence more than sufficiently
shows that he received adequate assurance that his complaints
would be remedied. He was promised reimbursement for the
grading discounts and was given the option of directing future
deliveries at another elevator. Moreover, nothing can be found
in the transcript of the evidence to indicate that Teeman ever
in writing demanded adequate assurance of due performance
from Jurek. This court concludes that the evidence amply sus-
tains the trial court’s finding that the plaintiff was not entitled
to withhold delivery of the corn under Minn. St. 336.2—609.

ME Plaintiff contends on appeal that the trial court by impli-
cation must have found that defendant did not repudiate the

298 ee

contract by failing to endorse and transmit GTA’s second re-
imbursement check to him and that such a finding was errone-
ous. Apparently plaintiff contends that defendant’s withholding
of the second check constituted a repudiation of the contract and
cites Jurek v. Thompson, 308 Minn. 191, 241 N. W. 2d 788
(1976). That contention has no merit. It does not clearly appear
that Jurek had received the second check from GTA before
Teeman wrote the letter of September 14, 1973, a fact that would
seem basic to plaintiff's position. Nor is there any evidence of
defendant’s having informed plaintiff either that he had received
the check or that he intended to withhold it. In short, there is no
evidence surrounding the second check sufficient to support a
finding that defendant’s conduct with respect to it justified with-
holding delivery under Minn. St. 336.2—610.*

Jurek v. Thompson, supra, affords no support to defendant’s
contentions here. In that case the buyer communicated to the
seller his intention to withhold payment for 4,000 bushels of corn
to be sold under one contract as a setoff against damages he
claimed for alleged breach of a second contract. This court held
that since Minn. St. 336.2—717° makes the right of setoff avail-

4 Minn. St. 336.2—610 provides: “When either party repudiates the con-
tract with respect to a performance not yet due the loss of which will
substantially impair the value of the contract to the other, the ag-
grieved party may

(a) for a commercially reasonable time await performance by the

repudiating party; or

(b) resort to any remedy for breach (section 336.2—703 or section
836.2—711), even though he has notified the repudiating party
that he would await the latter’s performance and has urged
retraction; and
in either case suspend his own performance or proceed in accord-
ance with the provisions of this article on the seller’s right to
identify goods to the contract notwithstanding breach or to sal-
vage unfinished goods (section 336.2—704).”

5 Minn. St. 336.2—717 provides: “The buyer on notifying the seller of
his intention to do so may deduct all or any part of the damages re-
sulting from any breach of the contract from any part of the price still
due under the same contract.”

(e

a 299

able only when the claimed damages result from a breach of the
same contract under which any part of the purchase price still
is due, the seller could properly interpret the seller’s declared
intention as a wrongful refusal to pay on the contract and thus
justification for withholding delivery. In the instant case, by con-
trast, withholding the second check could quite properly be
viewed as a setoff against damages incurred because of plain-
tiff’s refusal to perform the balance of his part of the contract.

MI Plaintiff’s final contentions relate to the trial court's
assessment of damages. He maintains that an agency relation-
ship existed between him and defendant and also that defend-
ant’s contract with GTA was collateral to defendant’s contract
with plaintiff. In either event, he argues, no award of damages
could be based on defendant’s settlement of his obligations to
GTA. Both contentions lack merit.

As this court stated in Jurek v. Thompson, supra, the two
elements necessary to support a finding that an agency relation-
ship existed are (1) a manifestation by plaintiff that defendant
be his agent for the resale of the corn and (2) the right of control
by plaintiff over defendant with respect to the sale of the corn.
The record here is utterly devoid of any evidence to a finding
that either element existed.

Plaintiff’s arguments against allowing the settlement figure
to be used as the basis for assessing damages stands on no
sounder footing. Minn. St. 336.2—711(1)* expressly provides
that ‘a buyer in the place of the defendant may “cover” by

6 Minn. St. 836.2—711(1) provides in part: “Where the seller fails to
make delivery or repudiates * * *, the buyer may cancel and whether
or not he has done so may in addition to recovering so much of the pur-
chase price as has been paid

(a) ‘cover’ and have damages under the next section as to all the

goods affected whether or not they have been identified to the
contract * * *.”

300 es

purchasing goods in substitution for those due from the seller.’
The test of proper cover is whether at the time and place of
covering the buyer acted in good faith and in a reasonable man-
ner. See, 21A M.S. A., p. 692, Uniform Commercial Code Com-
ments to Minn. St. 336.2—712. Strictly viewed, defendant’s
actions to settle his corn delivery commitments to GTA were not
a “cover,” but those settlements did represent the difference
petween the cost of cover and the contract price and are reason-
able under Minn. St. 386.2—712(2), which provides:

“The buyer may recover from the seller as damages the dif-
ference between the cost of cover and the contract price together
with any incidental or consequential damages as hereinafter
defined (section 336.2—715), but less expenses saved in con-
sequence of the seller’s breach.”

That exactly describes the remedy sought by defendant and
awarded by the trial court. No error is found.

The trial court’s findings of fact, conclusions of law, and order
for judgment are supported by the evidence and accord with the
applicable law. They are, therefore, affirmed.

Affirmed.

Le
SHIRLEY Y. HARDER v. WILLIAM E. HARDER.
251 N. W. 2d 703.

March 11, 1977—No. 46127.

7 Minn. St. 336.2—712(1) provides: “After a breach within the preced-
ing section the buyer may ‘cover’ by making in good faith and without
unreasonable delay any reasonable purchase of or contract to purchase
goods in substitution for those due from the seller.”

EE ee

Primus, Primus & Primus and Richard Lee Primus, for appel-
lant.

Farnes & Haeg and Harold E. Farnes, for respondent.

Heard before Rogosheske, Peterson, and Scott, JJ., and con-
sidered and decided by the court en banc.

PETERSON, JUSTICE.

Plaintiff, Shirley Y. Harder, appeals from an order denying
her motion for an award of alimony. Plaintiff and defendant,
William E. Harder, were divorced in 1971. The judgment and
decree of divorce, based upon a stipulation of the parties, granted
no alimony to plaintiff but reserved jurisdiction to consider that
issue at some future time. Plaintiff filed the present motion for
award of alimony in March 1975. The trial court denied alimony,
ruling that plaintiff was required to show a substantial change
in circumstances subsequent to the date of the divorce. The court
additionally divested itself of jurisdiction to hear any subsequent
applications for alimony.

The issue presented on appeal is whether the trial court prop-
erly construed Minn. St. 518.55, in so far as that statute pro-
vides that the court “may reserve jurisdiction of the issue of
alimony for determination at a later date.”

1 Minn. St. 518.55 provides: “Every award of alimony or support
money in a judgment of dissolution shall clearly designate whether the
same is alimony or support money, or what part of the award is ali-
mony and what part thereof is support money. Any award of payments
from future income or earnings of the custodial parent shall be pre-

Jo

302 es

We hold that by stipulating to the court’s reservation of juris-
diction over the issue of alimony, the parties preserved the
court’s authority to do in the future what it could have done at
the time of the divorce decree. When that authority is invoked
by a subsequent application for alimony, the court must then
make the initial determination of the propriety of an award and
its amount. That determination must be based upon the facts and
circumstances existing at the time the application is made, as
if the entire action had been brought at the later date.” It was
yeversible error to deny alimony on the ground that plaintiff
must show a substantial change in circumstances subsequent to
the date of the divorce. We reverse and remand for further pro-
ceedings not inconsistent with this opinion.

We allude briefly to corollary questions which surfaced in this
case, without intimating any views as to whether or not a grant
or denial of alimony would be appropriate upon remand. The
factors relevant to a decision to award alimony have, of course,
een the subject of numerous decisions. See, e. g., Vandewege
v. Vandewege, 284 Minn. 330, 170 N. W. 2d 228 (1969). A wife
in a divorce action has no absolute right to an award of alimony.
Vandewege v. Vandewege, supra; Kelley v. Kelley, 261 Minn.
405, 112 N. W. 2d 798 (1962). We recently held in Peterson v.
Peterson, 308 Minn. 365, 242 N. W. 2d 103 (1976), that the
marital misconduct of the parties.remains as one of several
factors to be considered by the court in the exercise of its dis-

sumed to be alimony. Any award of payments from the future income
or earnings of the non-custodial parent shall be presumed to be support
money unless otherwise designated by the court. In any judgment of
dissolution the court may determine, as one of the issues of the case,
whether or not either spouse is entitled to an award of alimony not-
withstanding that no award is then made, or it may reserve jurisdic-
tion of the issue of alimony for determination at a later date.”

2 Our holding on this issue does not, of course, preclude parties to a
divorce action from stipulating that, by reserving jurisdiction of ali-
mony, something different is meant than the standard we here enunci-
ate.

|

a “

cretion in the division of property and the award of alimony not-
withstanding the fact that a dissolution of marriage may now
be granted in this state without regard to fault. If the court
denies alimony without the reservation of continuing jurisdiction
to award alimony at a future time, the court is divested of juris-
diction by operation of law.

Reversed and remanded.

YETKA, JUSTICE (dissenting).

I respectfully dissent. I would affirm the trial court.

At the time of the initial proceeding for a divorce or dissolu-
tion of marriage, whether or not the parties agree by stipulation,
the court has a duty to act as a third party to represent the in-
terests of the state of Minnesota to see that there be not only a
fair and proper provision for child support but also a fair
division of property and a proper inquiry into the question of
alimony. If the parties have stipulated and agreed that there
should be no alimony, the court has not only the power but the
duty to set aside such a stipulation and to make a proper pro-
vision for alimony if it sees fit, or, in the alternative, to place
the case, if originally submitted to it as a default matter, onto”
the general trial calendar for resolution in an adversary pro-
ceeding.

Once the court decides that there shall be no alimony it has
decided that the circumstances of the parties at that time do not
justify the imposition of alimony. The question then becomes res
judicata. Of course, the court can reserve, as it did here, juris-
diction over the question for some future date, but that decision
can only logically envision an award of alimony where the cir-
cumstances of the parties have drastically changed since the dis-
solution was granted. Here the trial court found no change in
circumstances so it was correct in refusing to award alimony.

There is an additional reason why the trial court was correct
in its findings in this case: Courts have in recent years been
awarding alimony as a “stopgap” measure only to help one of

304 EE

the parties until that party can become self-sufficient. Here the
divorce took place in 1971. The motion for alimony was not made
until 1975—some 4 years later. To decide that the question of
alimony can be opened up after such a passage of time would
defeat the progress already made toward encouraging each of
the parties to build a new life and become financially inde-
pendent of the other.

‘Topp, JUSTICE (dissenting).

I join in the dissent of Mr. Justice Yetka.

VINCE SHYMANSKI v. BONNIE NASH.

251 N. W. 2d 854, Q

March 11, 1977—-No. 46661.

Clarance E. Haggtund and Robert M. Pearson, for appellant.
Coulter, Nelson & Sullivan and Lyle R. Frevert, for respondent.

P| 305

Heard before Todd, Yetka, and Winton, JJ., and considered
and decided by the court en banc.

YETKA, JUSTICE.

This case arises out of a two-vehicle accident. The matter was
tried to a jury which returned a verdict finding both plaintiff
and defendant negligent, however, only the negligence of defend-
ant was found to be a direct cause of the accident. Defendant’s
motions, in the alternative, for a judgment notwithstanding the
verdict, amended findings of fact, or a new trial were denied.
Judgment was entered on January 28, 1976. Defendant appeals
from the denial of the motions and from the judgment. We af-
firm.

On August 16, 1969, a two-vehicle accident occurred on Inter-
state Highway No. 35W (35W) approximately one-half mile
north of its intersection with Hennepin County Road 62 (Cross-
town). The weather on the day of the accident was warm, the
sky was clear with a few clouds, and the road surface was dry.

Vince Shymanski, plaintiff, was driving from his home in
Albert Lea, Minnesota, to his cabin on Cross Lake, near Pine
City, Minnesota, pulling a two-wheeled, 4- by 8-foot trailer filled
with personal items. The trailer was equipped with round electric
lights which were connected to the electrical system of plain-
tiff’s car. Just after he passed the Crosstown and was proceeding
north in the center lane of 35W, he noticed a drag at the back
of his car, which he thought was a flat tire. He began to stop in
the center lane because traffic to each side was heavy. As he was
stopping the vehicle, he saw his left trailer wheel travel past him
in the left lane, cross the median, and strike a southbound car.
He stopped the car and trailer in the center lane and put on the
flashing lights.

Bonnie Nash, defendant, was driving in the center lane of
85W at approximately 50 miles an hour when she noticed plain-
tiff’s vehicle about a quarter of a mile ahead of her, proceeding
at between 40 to 45 miles per hour. As she came closer to plain-
tiff’s vehicle she attempted to change lanes, but at the time both

306 Es

the left and right lanes were blocked with traffic. At this point,
plaintiff’s vehicle stopped. Defendant applied her brakes and
attempted to turn into another lane, but the lanes to each side
were still blocked with traffic. Her car struck the rear of plain-
tiff’s trailer, pushing it into the rear of plaintiff's car.

Plaintiff and his wife, who was a passenger in his car, brought
an action against defendant for personal injuries and property
damage. Defendant counterclaimed for her personal injuries and
property damage. At trial, prior to the selection of the jury, the
parties settled Mrs. Shymanski’s claim. The jury returned a
special verdict finding both plaintiff and defendant negligent,
but found plaintiff’s negligence was not a direct cause of the
accident.

Although several issues are raised, the determinative issues
are as follows:

1. Whether the Evidence Supports the Jury’s Finding of No
Causal Negligence on the Part of Plaintiff.

On appeal, defendant contends plaintiff was causally negligent
as a matter of law. Causation is ordinarily an issue for the jury.
Unless manifestly and palpably contrary to the evidence when
viewed most favorably to the verdict, the jury’s determination
must stand. It is only in those cases where reasonable persons
cannot differ that the issue of causation becomes one of law for
the court. E. g., Seivert v. Bass, 288 Minn. 457, 181 N. W. 2d 888
(1970); Pluwak v. Lindberg, 268 Minn. 524, 180 N. W. 2d 184
(1964).

Under the circumstances in this case, the jury could reasonably
conclude that defendant’s negligence alone was the proximate
cause of the accident.

2. Whether the Trial Court Erred in Refusing to Delay Trial
for Deposition of Medical Doctor.

Defendant further contends the trial court committed re-
versible error in failing to postpone the trial to allow defendant
to take the deposition of a medical doctor who had examined
plaintiff and whose name and report had not been furnished by

Dt 307
plaintiff in response to continuing interrogatories under Rule
33, Rules of Civil Procedure, until the day before trial.

_ One of the purposes of Rule 33 is to prevent unjust surprise
and prejudice. Gebhard v. Niedzwiecki, 265 Minn. 471, 122
N. W. 2d 110 (1968). This is particularly true where expert
witnesses are involved because the preparation required of op-
posing counsel demands more time and effort. Fritz v. Arnold
Mfg. Co. 805 Minn. 190, 195, 282 N. W. 2d 782, 786 (1975). How-
ever, in the present case when defendant’s attorney objected to
plaintiff’s failure to provide the information, she asked that if
a continuance was not allowed that she be allowed to enter the
report of that doctor into evidence.

Defendant’s counsel received the medical report of the medical
doctor on a Monday—a day prior to the commencement of trial—
yet made no request at that time for a continuance to take the
deposition of the doctor. Request was not made for a continuance
until Wednesday, the second day of trial. Moreover, defendant’s
counsel did not strenuously argue for a continuance, but rather
indicated a desire to have the report introduced as evidence.
Defendant’s counsel in making the request stated:

“J just wanted to preserve for the record that I would request
Mr. Shymanski’s counsel to agree to allow the report of October
13, 1971, into evidence or else allow me sufficient time during
which I could take a deposition of one of the Mayo Clinic doctors.”
She further stated:

«x * * T mean if you allow the report in, then I will not at-
tempt to set up a deposition * * *.”

The trial court did not allow a continuance, but did allow the
report of the doctor to be read into evidence, consistent with de-
fendant’s request. Thus, it is difficult to see how defendant was
prejudiced. The court granted relief which was consistent with
the request of defendant’s attorney. The purpose of sanctions
under Rule 33 is to prevent a party who fails to comply with the
rule from profiting from his own wrong. In cases where a mis-

308 ee

take is an honest one and the harm can be undone, several options
are available. One is a continuance. Another, as was used here,
where the primary evidence consists of a written report, may
be reading the evidence into the record. The relief will vary with
the circumstances, tempered always by the sound discretion of
the trial court. On the facts of this case, there is no showing of
reversible error.

The following issues are also raised by defendant on appeal:

8. Whether the Trial Court Erred in Allowing Plaintiff to be
Called as Rebuttal Witness.

Defendant argues the trial court abused its discretion in allow-
ing plaintiff to testify on redirect examination about the location
of the accident and his examination by defendant’s doctor.

This was a matter for the sound discretion of the trial court.
Most important, even assuming arguendo the trial court was in
error, there is no showing of prejudice.

4. Whether Plaintiff Sustained His Burden of Proof on Issue
of Causation.

Defendant finally argues that plaintiff failed to sustain his
burden of proof on the issue of the causal relationship between
the accident and the injuries for which he seeks recovery.

Plaintiff called a medical doctor as an expert witness. The
doctor testified that in his opinion the accident was the cause
of the injuries for which plaintiff sought recovery. Defendant’s
medical expert testified to the contrary. The weight and credi-
bility of expert testimony, however, is generally for the jury.
E. g., State v. McCabe, 251 Minn. 212, 87 N. W. 2d 360 (1957).
The rule which governs this issue is stated in Freeman v. Matson,
230 Minn. 261, 271, 41 N. W. 2d 249, 255 (1950), as follows:

«* * * In the field of medical science, it is apparent that
there will be a difference of opinion. Where the opinions of re-
putable doctors have a reasonable basis on the facts, it must be
left to the trier of facts to say who is right when other doctors
have conflicting opinions.”

be 309

In this case, the jury chose to believe plaintiff's expert. So long
as his opinion has a reasonable basis in fact, the decision of the
jury is not open to review on appeal.

Affirmed.

SWEN HYLEN AND ANOTHER v.
MILTON OWENS AND OTHERS.

251 N. W. 2d 858,

March 11, 1977—No. 46646.

310

Pt
es
Piper, Sunde & Olson and LaMar T. Piper, for appellants.
McLean, Peterson, Sullivan & Haugh, Charles T. Peterson,
and John F. Corbey, County Attorney, for respondents.

Scort, JUSTICE.

This is an appeal from an order for a declaratory judgment
finding L. 1975, c. 249, constitutional. We affirm.

In March 1967 a petition was filed in Blue Earth County for
the improvement of Blue Earth County Ditch No. 27, originally
established in 1911. The improvement was challenged by plain-
tiffs, Swen and Irene Hylen, and this court reversed on the
ground that the petition could not include any upstream ex-
tension under Minn. St. 106.501.+

A petition was again filed for improvement of County Ditch
No. 27 on April 7, 1970. The viewers’ report filed October 14 of
that year established benefits to landowners of $138,919 and
damages of $4,858. The Board of County Commissioners let con-
tracts on June 19, 1972, totaling $97,346.73.2 Three years later,
after our decision upholding the benefits and damages determi-
nation,® the county board readvertised for bids. The total of
these low bids, plus costs, expenses and interest already charged

- to the ditch account was $146,554.91, an amount well in excess
of the benefits determined in 1970. This overrun would have been
impermissible under Minn. St. 106.201, subd. 2, which reads:

“Tf the board or court shall find that the engineer’s and view-
ers’ reports have been made and all other proceedings in the mat-

1In re Petition of Oldenborg v. Hylen, 286 Minn. 413, 176 N. W. 2d 78
(1970).

2The 2-year delay was due to plaintiffs’ challenge of the establish-
ment of the ditch. We upheld the establishment in In re Petition of
Sandt v. Hylen, 292 Minn. 498, 195 N. W. 2d 831 (1972).

3 In re Petition of Sandt v. Hylen, 301 Minn. 475, 224 N. W. 2d 342
(1974).

be 311

ter had in accordance with law, that the estimated benefits are
greater than the total estimated cost, including damages, that
the damages and benefits have been duly determined, that the
proposed drainage system will be of public utility and benefit,
and will promote the public health, that the proposed system is
practicable, and that such reports as made or amended are com-
plete, just and correct, then the board or court shall by order con-
taining such findings, establish the drainage improvement as
reported or amended, and adopt and confirm the viewers’ report
as made or amended.” (Italics supplied.)

During the period of litigation, construction costs soared due
to inflation and it became apparent that the ditch could not be
completed within the statutory limits. Therefore, legislative au-
thority was gained by the passage of L. 1975, c. 249, § 1, to au-
thorize spending up to $150,000:

“Section 1. Subdivision 1. Notwithstanding the provisions
of Minnesota Statutes, Chapter 106, or any other law to the con-
trary, the county board of Blue Harth county may by contract
expend a sum not to exceed $150,000 for the completion of the
improvement of that certain county ditch heretofore designated
county ditch no. 27, and to issue the general obligation drainage
bonds of the county pursuant to Minnesota Statutes, Chapter
106 in order to provide the sums expended by authority of this
section and all other costs incident thereto.

“Subd. 2. Any contract heretofore entered into for the con-
struction of said improvement of county ditch no. 27 may be re-
negotiated, or if necessary, bids may be resolicited and new con-
tracts let to provide for construction cost increases which, due
to inflation, have accrued since the original contracts were let,
and any such construction cost increase shall be paid for by spe-
cial assessments levied against the benefited landowners in the
same proportion and manner as determined by the viewer’s re-
port previously approved by the county board.”

Laws 1976, c. 157, § 1, increased the permissible expenditure
limit to a sum not to exceed $180,000.

312 as

Plaintiffs contend that L. 1975, c. 249, is unconstitutional on
three grounds: (1) due process, (2) just compensation, and (3)
impairment of contractual obligations.‘ The relevant provisions
of the Minnesota Constitution are art. 1, §§ 7, 11, and 18, which
provide as follows:

“Sec. 7. No person shall be * * * deprived of life, liberty
or property without due process of law. * * *

ek F &

“Sec. 11. No* * * law impairing the obligation of contracts

shall be passed * * *,
ee Fk

“Sec. 18. Private property shall not be taken, destroyed or
damaged for public use without just compensatien therefor
eR
See, also, U. S. Const. art. I, § 10; U. S. Const. Amend. V and
XIV.

Hf Plaintiffs’ procedural due process claim appears to rest
in the fact that they “were not informed of the proposed legisla-
tion [c. 249] and were given no opportunity to be heard there-
on.” The Supreme Court of the United States has held that in
cases involving the taking of property by legislative action, due
process does not require notice and hearing to affected land-
owners. Bragg v. Weaver, 251 U. S. 57, 40 S. Ct. 62, 64 L. ed. 135
(1919); Georgia v. Chattanooga, 264 U. S. 472, 44 S. Ct. 369, 68
L. ed. 796 (1924); Bi-Metallic Co. v. Colorado, 239 U. 8S. 441, 36
S. Ct. 141, 60 L. ed. 872 (1915). This court has held likewise.
Housing and Redevelopment Authority of St. Paul v. Greenman,
255 Minn. 396, 96 N. W. 2d 673 (1959). The statement of Mr.
Justice Holmes in Bi-Metallic Co. v. Colorado, supra, although
made in 1915, still summarizes the law on this subject:

“Where a rule of conduct applies to more than a few people

+ Plaintiffs have challenged both c. 249 and the 1976 amendment on
the same grounds. Since the two enactments must stand or fall to-
gether, “c. 249” will be used throughout for convenience.

be 318

it is impracticable that every one should have a direct voice in
its adoption. The Constitution does not require all public acts to
be done in town meeting or an assembly of the whole. General
statutes within the state power are passed that affect the person
or property of individuals, sometimes to the point of ruin, with-
out giving them a chance to be heard. Their rights are protected
in the only way that they can be in a complex society, by their
power, immediate or remote, over those who make the rule.” 239
U. S. 445, 36 8. Ct. 142, 60 L. ed. 375.

Plaintiffs were able to make their objections to the ditch
known at many points during the procedural history of this case,
where their right to be heard was unquestioned. This due process
right does not, however, extend to c. 249 itself, which affects all
the people of Blue Earth County and does not operate to plain-
tiffs’ special detriment. Chapter 249 is a legislative enactment
which is general in its application and, as such, is not subject to
the requirements of due process in the procedural sense.®

Due process also requires that legislative enactments not be
arbitrary or capricious or, stated another way, that they be a rea-
sonable means to a permissible objective. Nebbia v. New York,
291 U. S. 502, 54 S. Ct. 505, 78 L. ed. 940, 89 A. L. R. 1469
(1934); West Coast Hotel Co. v. Parrish, 300 U. S. 379, 57 S. Ct.
578, 81 L. ed. 703, 108 A. L. R. 1830 (1937); Minn. Wheat Grow-
ers Co-op. Market. Assn. v. Huggins, 162 Minn. 471, 203 N. W.
420 (1925). :

In this case the legislature was faced with the problem of a
duly authorized land-improvement project about to exceed its
funding limit due to delays and inflation. Lack of action would
result in the waste of county funds already expended for the
ditch and would deprive assessed landowners of the benefits of
the project. The legislature sought by c. 249 to allow the ditch

5 This is not to say that c. 249 is not special legislation within the
meaning of Minn. Const. art. 12, § 1. The validity of this enactment is
established since it satisfies the requirements of art. 12, § 2, and Minn.
St. 645.023.

314 es

to be completed by providing an increase in funding when the
cost of completion appeared to be, but was not necessarily, over
and above that allowed under Minn. St. 106.201 due to the un-
usual circumstances of this project. This action cannot be con-
sidered arbitrary or capricious, and is a reasonable means to ac-
complish the objective sought. Chapter 249 is therefore not in-
valid as violating due process.

I The benefits determined by the viewers in 1970 totaled
$138,919. However, by the time bids were finally received in
September of 1975 the total cost including expenses and damages
came to $146,554.91, or $7,635.91 in excess of the benefits as
originally determined. We have previously held that when a spe-
cial assessment exceeds the special benefits to the property as-
sessed, there is a taking without just compensation. Quality
Homes, Inc. v. Village of New Brighton, 289 Minn. 274, 183
N. W. 2d 555 (1971).

Affidavits submitted to the court below on behalf of the Blue
Earth Board of County Commissioners show that land values
in Blue Earth County have increased sharply since 1970, and
further state that the ditch will result in considerable increases
in the value of benefited lands. These facts allow the inference
that the benefits from the ditch have also risen, probably in pro-
portion to land values generally, since the 1970 estimate. It might
also be inferred that the increase in benefits has kept pace with
the increase in costs, so that benefits still exceed costs. This is
a factual question and, as such, is open to dispute.*

6 An amendment to Minn. St. 1974, § 106.241, L. 1976, c. 126, § 1, sup-
plies the procedure to be followed in future cases where costs have in-
creased due to “unavoidable delay.” An interested person may petition
the county board or court for a reconsideration of benefits and damages
to take into account the effects of inflation on both. This amendment
was approved one day prior to the approval of L. 1976, c. 157, which
raised the spending limit for the ditch to a sum not to exceed $180,000.
Since c. 157, § 1, explicitly states, however, that it is to take effect “[n]Jot-
withstanding the provisions of Minnesota Statutes, Chapter 106,” the
new procedure would not be applicable to this case unless costs exceed
the $180,000 limit.

be 315

In enacting c. 249 it must be presumed that the legislature had
these facts and others before it. Eldred v. Division of Employ-
ment and Security, 209 Minn. 58, 295 N. W. 412 (1940); State
v. Donovan, 218 Minn. 606, 16 N. W. 2d 897 (1944); Arens v.
Village of Rogers, 240 Minn. 386, 61 N. W. 2d 508 (1953), appeal
dismissed, 347 U. S. 949, 74 S. Ct. 680, 98 L. ed. 1096 (1954). It
cannot be presumed that the legislature acted capriciously, or
without knowledge of facts forming a reasonable basis for its
action. Hassler v. Engberg, 283 Minn. 487, 48 N. W. 2d 343
(1951). Plaintiffs have brought forth no evidence to show that,
in fact, present costs exceed present benefits. In the absence of
such a showing, deference to legislative judgment requires. the
court to assume that the legislature’s implicit finding is correct,
namely, that benefits still exceed costs as in 1970, and that just
compensation is still being given for property taken in the public
interest. :

I Plaintiffs argue that “once a ditch is established the land-
owners have a vested right in the system that cannot be altered,”
citing Lupkes v. Town of Clifton, 157 Minn. 498, 196 N. W. 666
(1924). They further contend that this “vested right” principle
“applies also to the benefits and damages as determined in the
proceedings and that these cannot be altered by subsequent legis-
lation,” citing Garrett v. Skorstad, 148 Minn. 256, 173 N. W. 406
(1919).

These cases clearly do not extend so far. Lupkes decided only
that once an assessment has been made and a benefit conferred,
the benefit may not be withdrawn without adequate compensa-
tion. 157 Minn. 499, 196 N. W. 669. Garrett stands for the
principle that once a ditch is established and benefits and dam-
ages determined in an appropriate proceeding, the matter is
closed to collateral attack as by an injunction to halt the ditch
construction. 148 Minn. 259, 173 N. W. 407. Neither case can be
extended to bar the legislature from acting to ensure that the
promised benefit will in fact materialize when intervening cir-
cumstances threaten to prevent it.

Pe

316 es

Plaintiffs do not make clear what “contract” to which they
are a party has been impaired by c. 249. If any analogy to con-
tract can be drawn, it could only be phrased in terms of the
state’s obligation to provide the ditch in exchange for the bene-
fited landowners’ obligation to pay for it. The legislature sought
by c. 249 to allow this “contract” to be completed, even though
both costs and benefits may have risen since the initial establish-
ment of the ditch. Thus, even if a contract can be imagined, the
legislature did not impair obligations under it by passing c. 249.
Plaintiffs theory of a “vested right” in the original assessment
has no support in the cases, nor do the facts of this case warrant
the application of such a theory.

Affirmed.

YETKA, JUSTICE (concurring specially).

I concur in the result, but only because plaintiffs have failed
to carry their burden on appeal on a crucial issue.

During the delay that has occurred, it is entirely possible that
additional lands not originally benefited by the proposed drain-
age ditch would now be benefited. However, as the majority opin-
ion points out, plaintiffs have not presented such evidence and,
therefore, have not met the burden imposed upon them in chal-
lenging the legislation.

Finally, it appears to me that the entire drainage laws now
on the books should be looked at by the legislature in the light
of the new environmental protection statutes added during recent
years, compiled in Minn. St. cc. 116 to 116H. Surely, under the
new environmental laws serious doubt as to the desirability of
any general drainage schemes must exist.

It appears ludicrous to me that simply to gain a few acres of
farm land, swamps and marshes should be drained by one unit
of government while another unit of government seeks state
funds to acquire and protect wetlands, also to have the same
farming areas that are the most active in the drainage schemes
seek Federal and state disaster relief due to the effects of
drought during dry cycles.

Le 317

Ors, JUSTICE (concurring specially).
I concur in the views expressed by Mr. Justice Yetka.

PETERSON, JUSTICE (concurring specially). ra
I concur in the views expressed by Mr. Justice Yetka.

KELLY, Justice (concurring specially).
I concur in the result.

Mr. Cuier Justice SHERAN took no part in the consideration or
decision of this case.

be
PETER J. HENGEL v. MARY J. HYATT.

252. N. W. 2d 105.

March 11, 1977—No. 46797.

Ryan, Ryan, Ebert & Rutiger and Max J. Ruttger III, for ap-
pellant.
Gustafson & Borstad and Glen A. Gustafson, for respondent.

PER CURIAM,

Peter J. Hengel appeals from an order of the district court
vacating a default judgment in an action for rent and property
damage in connection with the lease of certain property located
in Staples, Minnesota. The sole issue raised is whether the dis-
trict court abused its discretion in vacating the judgment. We
affirm.

318 a

Hengel commenced this action on December 8, 1975, with
service upon Mary J. Hyatt’s father at his home. On December
29, 1975, judgment was entered by default in the county court.
Plaintiff was served with notice of motion and motion to set
aside the default judgment on January 26, 1976.

In support of her motion, Hyatt averred that her usual place
of abode was 1208 S. E. Seventh Street, Minneapolis, where she
lives and works. As such, she denies being personally served with
process but admits receiving the papers from her parents. She
asserted that the absence of personal service and the absence of
fault in failing to answer in a timely fashion were sufficient
grounds to set aside the judgment.

Hengel contends that the order vacating the judgment con-
stitutes an abuse of discretion as Hyatt had no reasonable excuse
for her failure to answer in a timely manner and that any objec-
tion she may have had to the jurisdiction of the court was waived
upon her interposing an answer and counterclaim in the matter.

1. It is elementary that a motion to vacate a judgment for
lack of jurisdiction merely asserts that the judgment is void and
involves no question of discretion. Rule 60.02, Rules of Civil Pro-
cedure. If the judgment is void for lack of jurisdiction, it must
be set aside without regard to such factors as the existence of
a meritorious defense. Lange v. Johnson, 295 Minn. 820, 204
N. W. 2d 205 (1978) ; Pugsley v. Magerfleisch, 161 Minn. 246,
201 N. W. 323 (1924).

Rule 4.03, Rules of Civil Procedure, governs the service of pro-
cess and provides in part as follows:

“Service of summons within the state shall be made as follows:

“(a) Upon an individual by delivering a copy to him person-
ally or by leaving a copy at his usual place of abode with some
person of suitable age and ‘discretion then residing therein.”
The return of service indicated that it was made upon defendant’s
father at his home, while Hyatt’s motion to vacate alleged that

her place of abode was Minneapolis. The place of one’s abode
presents a fact question. Lovin v. Hicks, 116 Minn. 179, 183 N.

[| 319
W. 575 (1911). While the record would not support a conclusion
that as a matter of law defendant’s place of abode as of the date
of service was in Minneapolis, the allegation in the motion pro-
vides a reasonable basis for the court’s order.

2. In addition, at issue is Rule 60.02 (1), Rules of Civil Pro-
cedure, which permits the trial court to vacate a judgment upon
motion within a reasonable time for mistake, inadvertance, sur-
prise, or excusable neglect. To avail himself of this relief, the
movant must show excusable neglect or mistake and establish
that he has a meritorious defense and that he has acted with due
diligence. Hinz v. Northland Milk & Ice Cream Co. 237 Minn. 28,
53 N. W. 2d 454 (1952). If no affidavit of merit or other proof
of a valid defense is provided, the motion to vacate will be denied.
Vrooman Floor Covering, Inc. v. Dorsey, 267 Minn. 318, 126 N.
W. 2d 377 (1964).

While Hyatt’s motion and its attachments failed to enumerate
specific facts constituting her defense, she does allege a defense
of constructive eviction. She also alleges a palpable case of ex-
cusable neglect, reciting the late service of process, aborted con-
tact with an attorney, and diligent efforts in all matters there-
after. See, Finden v. Klaas, 268 Minn. 268, 128 N. W. 2d 748
(1964).

8. Hengel further claims that the assertion of a counterclaim
by Hyatt is a submission to the jurisdiction of the court and al-
leviates any defects in the service of the summons and complaint.
He relies on our decision in Mississippi Valley Devel. Corp. v.
Colonial Enterprises, 300 Minn. 66, 217 N. W. 2d 760 (1974).
‘That case involved an attempt to vacate a default judgment based
on improper service of the summons and complaint, but the sub-
sequent actions of the defendant readily distinguish it from this
ease. There, the defendant received two extensions of time to
answer from the plaintiff without answering. In addition, de-
fendant moved the court to compel arbitration, which was denied.
An appeal was commenced from the denial of this order and then
dismissed. Only then, some 8 1/2 months after the service of the

320 EE

summons and complaint, did plaintiff enter default judgment.
Seven months. later, defendant moved to vacate the judgment.
In this case, defendant sought to serve her answer and counter-
claim 26 days after the alleged service, which was the day of the
entry of default judgment. The answer and counterclaim were
returned and defendant immediately moved the court to vacate
the judgment. The answer was never filed with the court in the
original action and no relief was sought from the court other
than to vacate the judgment. The mere fact that Hyatt asserted
affirmative relief in her answer which was never part of the
court proceedings in the entry of default judgment cannot be as-
serted retroactively as a submission to jurisdiction of the court.

Therefore, although it appears that defendant’s motion may
have been deficient in some particulars, the district court’s order
did not amount to an abuse of discretion, and is not clearly er-
roneous. .

Affirmed.

Le
STATE v. TIMOTHY MICHAEL McDONALD.
251 N. W. 20.705.

March 11, 1977—No. 46069.

C. Paul Jones, State Public Defender, for appellant.

Warren Spannaus, Attorney General, William B. Randall,
County Attorney, and Darrell C. Hill, Assistant County At-
torney, for respondent.

Per CURIAM.

_ Defendant was found guilty by a district court jury of a charge
of felonious theft (theft of property over $100 in retail market
value), Minn. St. 609.52, subd. 2(1) and subd. 3(2), and was sen-
tenced by the trial court to a maximum term of 5 years in prison
with the sentence stayed on condition that defendant serve a
term of 1 year in the workhouse (which term expired in June
1976). On this appeal from judgment of conviction, defendant
does not challenge the sufficiency of the evidence that he com-
mitted a theft, but contends that the trial court prejudicially er-
red in ruling that the evidence did not warrant submission of
the included offense of misdemeanor theft (theft of property
having a retail market value of $100 or less), Minn. St. 609.52,
subd. 3(5). We reverse and grant defendant a new trial.

The test which must be applied in determining whether or not
to submit a lesser-included offense is whether there is evidence
which produces a rational basis for a verdict acquitting defend-
ant of the offense charged and convicting him of the lesser of-
fense.1 See, State v. Leinweber, 303 Minn. 414, 422, 228 N. W.
2d 120, 125 (1975). One commentator explains the applicability
of this test as. follows:

«* * * Where the prosecution has offered uncontroverted evi-
dence on an element necessary for a conviction of the greater
crime but not necessary for the lesser offense, a duty rests on
the defendant to offer at least some evidence to dispute this issue
if he wishes to have the benefit of a lesser offense instruction.
While a jury could acquit him of the crime charged, despite all
the evidence, this does not mean that he has the right to have a
jury choose to find him guilty of a lesser crime without some
basis in the evidence for such a choice.

“The controverted evidence to dispute the proof of the ele-

1 This test is the same test as that recommended in A. L. 1, Model
Penal Code, § 1.07(5).

PT

322 es

ment separating the crime charged from the lesser offense can
be supplied by inference as well as by direct testimony. A court
must appraise all of the testimony and evidence to determine
whether it is capable of more than one reasonable inference.
These different inferences can arise solely from the testimony
of the prosecution’s witnesses such as instances where different
versions of an incident are recited. Where controverting evi-
dence is present, even conflicting testimony or inconsistent state-
ments by a defendant will not affect his right to have his version
of an occurrence presented for a jury’s determination although
such inconsistencies might damage his credibility.” Barnett, The
Lesser-Included Offense Doctrine, 5 Conn. L. Rev. 255, 278.

The issue in this case is whether or not a jury could rationally
have found that the value of the stolen property—an electric
power saw and a cordless electric screwdriver—was less than
$100, the statutory demarcation between felonious theft and mis-
demeanor theft. The owner of the store from which the goods
were taken testified that the retail price of the saw at his store
was $94.95 and the retail price of the screwdriver was $26.88,
a total of $121.83; but he testified that he would have sold the
two items together at a 10-percent discount, making the total
$109.65. A defense witness, on the other hand, testified that at
about the time of the trial he had purchased an identical saw at
another retail store for $79.96 and was told that the price had
only shortly before increased to that amount from $75. There
was, to be sure no testimony concerning the price of a cordless
electric screwdriver at any other store, but the jury might ra-
tionally infer that similar variations in the retail markup of that
item might exist in other stores. If so, the jury could find that
the value of the two items was something less than $100. The
jury was, of course, not required either to credit the defense
testimony or to draw any such inference, but neither was it com-
pelled to accept the owner’s testimony as to value.

“Value” for purposes of the theft statute is defined by Minn.
St. 609.52, subd. 1(3), as “the retail market value at the time of

|

Le 823

the theft.” The value of a mass-marketed item taken from a retail
store is not necessarily the value of the item in the market in
which the owner of the store purchased it but the value in the
market in which the item was being sold. Although testimony
as to the price on the price tag ordinarily would be sufficient to
justify a finding that that was the retail market value of the item
taken, it is not conclusive, for the price charged by the store from
which the item is taken may not accurately reflect the market
value of the item. People v. Tijerina, 1 Cal. 3d 41, 81 Cal. Rptr.
264, 459 P. 2d 680 (1969). A defendant is free to introduce direct
and circumstantial evidence bearing on the value of the item in
the retail market and thus, as here, may call other witnesses to
testify that other stores sell the item for less, Husten v. United
States, 95 F. 2d 168 (8 Cir. 1938), People v. Irrizari, 5 N. Y. 2d
142, 182 N.Y. S. 2d 861, 156 N. E. 2d 69 (1959) ; or he may intro-
duce evidence suggesting that the item does not have much of
a market any more as, for example, where an item has been on
the shelf unsold for a long time. People v. Fognini, 374 Ill. 161,
28 N. BE. 2d 95 (1940).

It is plainly possible that, given the option, the jury might have
acquitted defendant of the felonious theft charge and found him
guilty of misdemeanor theft. We recognize the considerable dis-
eretion of the trial court in determining whether or not to submit
a lesser offense but are constrained to find prejudice in the cir-
cumstances of this case where the critical finding of market
value is so very close.

Reversed and remanded for a new trial.

ROGER HILL AND ANOTHER v.
OKAY CONSTRUCTION COMPANY, INC., te,
AND ANOTHER. a
E. E. RANTA, APPELLANT. .

252 N. W. 2d 107.

March 18, 1977--Nos. 46374, 46414.

Meagher, Geer, Markham, Anderson, Adamson, Flaskamp &
Brennan, W. D. Flaskamp, and John Hally Riley, for appellant.

Rischmiller &€ Wasche and Robert Wm. Rischmiller, for re-
spondents Hill.

Hvass, Weisman & King and Russell Pannier, for respondent
Okay Construction Company, Inc.

SHERAN, CHIEF JUSTICE.

This is an appeal by defendant E. E. Ranta from a judgment
entered against him in district court and from an order denying
his motion for amended findings of fact, conclusions of law, and
order for judgment or in the alternative for a new trial. Defend-

326

ant Okay Construction Company, Inc. (Okay), also seeks re-
view pursuant to Rule 106, Rules of Civil Appellate Procedure.

Stated generally, the problems considered in the lower court
were (a) the nature of a business relationship. between plain-
tiffs, Roger and Judith Hill, and Okay; (b) the liability for the
operating debts of the business at one time owned by the Hills
and allegedly purchased by Okay; ((c) the professional mal-
practice of Ranta, an attorney, in his representation of both the
Hills and Okay during the course of their transactions; and (d)
the rights of the respective parties to indemnity.

The material facts of this case are vigorously disputed, but
viewing the evidence, as we must, in a light most favorable to
the verdict, they may be stated as follows:

In August 1971, the Hills began business under the name of
Romans. Romans consisted of three separate enterprises: Ro-
mans’ Personnel |(an employment agency); Romans’ Furniture
(an interior design studio) ; and Romans’ Audio Classics (retail
sales of stereo components). Although the Hills filed articles of
incorporation for Romans, they did not complete the incorpora-
tion process and continued to operate their business as a sole pro-
prietorship.

The principal assets of Romans were the building which
housed the business, located at 8012 Cedar Avenue South, Bloom-
ington, Minnesota, and the furnishings in it. These assets were
purchased in June or July 1971, for $180,000 and $15,000 re-
spectively.

The enterprises were not successful. By the spring of 1972 the
Hills were short of cash, heavily indebted, and pressed by credi-
tors. It was during this time, about June 1972, that they met
Ranta.

Roger Hill consulted Ranta regarding these financial prob-
lems, and Ranta agreed to look into the matter. A series of meet-
ings between Ranta and the Hills followed wherein Ranta re-
viewed the Hills’ records to ascertain their financial condition.
In an effort to reduce the pressure from creditors, Ranta com-

| 327

posed a form letter for the Hills to distribute to their creditors,
requesting forbearance in collection efforts and suggesting the
possibility of settling all outstanding accounts for payment of
75 percent of the balances due. There is also some evidence that
Ranta represented the Hills as. plaintiffs in a suit to collect one
of their accounts receivable.

Near the end of June or beginning of July, Ranta told the Hills
that he knew “somebody that might be interested in helping them
out.” That “somebody” was another of Ranta’s clients, Okay.

Ranta had represented Okay continuously since its inception
in the early 1950’s. He believed that Okay was faced with the pos-
sibility of an accumulated earnings tax assessment by the Inter-
nal Revenue Service and had advised Felix Kvasnicka, president
of Okay, that an investment of Okay’s capital surplus would
avoid such an assessment. Ranta felt that Romans presented an
opportunity for just such an investment.

The Hills, Kvasnicka, and Ranta met in Ranta’s office in July
1972 and decided to proceed with some sort of business relation-
ship. Subsequent meetings were held to work out the details of
the arrangement. It is regarding these details that the testimony
of the parties differs most markedly. It is undisputed, however,
that Ranta undertook to represent both the Hills and Okay in
this transaction.

Roger and Judith Hill testified that they believed they were
selling their entire business to Okay. In their minds, this meant
transferring to Okay the physical assets of the business, the ac-
counts receivable, and all of the liabilities of Romans. They ex-
ecuted an assignment of their vendees’ interest in the contract
for deed by which they were purchasing the Cedar Avenue prop-
erty, along with a quitclaim deed for the same property. They
also executed a bill of sale for all of the personalty contained in
the building. These documents reflected consideration in the
amounts of $20,000 and $10,000 respectively, which was the
equity the Hills had in the property. The Hills testified and the
trial judge found that they never received this $30,000. Roger

328 es

Hill continued to run the business as a salaried employee. The
Hills further understood that they had the right to repurchase
their business at a future date.

On the other hand, Kvasnicka. testified that it was never his
intention to have Okay purchase the business of Romans; rather,
from his discussions with Ranta he understood that Okay would
be lending the Hills money, and in return Okay would receive
title to the building and furniture as security. Both Okay and
Ranta contended that the first $30,000 advanced was to consti-
tute payment of the consideration called for in payment for the
Cedar Avenue building and the furniture. The amount of the loan
was not fixed, but rather was open ended. As Romans needed
more money, Okay would advance it, believing the loan was se-
cured by a rather substantial equity in the Cedar Avenue build-
ing. The building and personal property were to be reconveyed
to the Hills at some future date, if and when they repaid all sums
advanced plus some percentage to cover the increased value in
the property due to inflation.

In addition to this testimony, the jury considered evidence re-
garding the conduct of the parties which was probative of their
agreement.

Funds were transferred to Romans through the establishment
of a special bank account for Okay. Deposits were made by Okay
into that account, and the checks drawn on it were drafted by
the Hills and signed by Kvasnicka or Ernest Johnson, Okay’s
vice president. Roger Hill testified that Ranta approved all of
the checks before they were presented to Kvasnicka or Johnson.
Kvasnicka testified that he believed Ranta approved most of the
checks before he signed them. Ranta denied this. It is undisputed
that all the checks were executed by either Kvasnicka or John-
son.

Both Ranta and Kvasnicka participated in the selection of a
new interior design manager for Romans’ Furniture.

Judith Hill testified that subsequent to the transaction Kvas-
nicka and Johnson were introduced to Romans’ employees. Ann

— 329
McGee, a Romans personnel counselor, recalled that Kvasnicka
was introduced as the new owner. Richard Brown, manager of
the personnel division, recalled that he personally introduced
Kvasnicka and Johnson, without objection from either, to some
of the employees “as President and Vice-President of Okay Con-
struction which * * * we are now a part of.” Neither Kvasnic-
ka nor Johnson was examined on this point at trial.

By far the most concrete collateral evidence of the Okay-
Romans relationship consists of an application for credit made
by Romans and two financial profiles of Okay, all of which
were executed by Kvasnicka.

Judith Hill testified that Romans’ credit was insufficient to
place the fall orders for merchandise and that it became neces-
sary to obtain from Okay some indication of its involvement with
Romans. One such document was a credit application to Rotel
of America, Inc., an audio supplier. The credit application con-
sisted of a one-page document listing Romans’ Audio Classics
as the credit applicant and, more importantly, showing it as a
subsidiary of Okay. Further, both Kvasnicka and Johnson were
listed, as president and vice president respectively, as the prin-
cipal owners. The document, dated November 2, 1972, was signed
by Kvasnicka. Roger Hill testified that this document was also
discussed with Ranta. Ranta denied this. Kvasnicka, however,
testified that he discussed the Rotel application with Ranta prior
to executing it.

The jury was also allowed to consider the execution of the dis-
puted financial profiles of Okay. These documents were identical
except that one denoted Romans’ Furniture as a division of
Okay, and the other so denoted Romans’ Audio Classics. Roger
Hill testified, and the jury found, that both Ranta and Kvas-
nicka approved these financial profiles and authorized their dis-
tribution to audio and furniture suppliers. Kvasnicka admitted
executing the documents, but claimed that he first became aware
of their dissemination to the trade in 1973 when copies were
attached to pleadings in lawsuits instituted to collect delinquent

330 Ee

Romans accounts payable. Ranta denied any knowledge of the
profiles or any other type of credit authorization and denied
that he ever authorized these profiles to be distributed. Judith
Hill testified that these profiles had in fact been distributed,
and Romans again received credit from the suppliers who were
given copies of such documents.

Some of the other evidence adduced at trial tended to support
the contentions of Okay and Ranta regarding the nature of the
business relationship between the Hills and Okay. There was the
fact that the Hills continued their day-to-day management of
Romans; this is tempered somewhat by the control Ranta and
Okay exerted over disbursements and hiring. Ray Rand, Okay’s
accountant, testified that the monies advanced to Romans were
carried on Okay’s books. as a loan and that Okay never took any
tax deduction for Romans’ operating losses. Such a deduction, if
taken, would have resulted in substantial tax savings for Okay.

Additionally, Ranta was examined at length regarding the ap-
plicability of the bulk transfers provisions of the Uniform Com-
mercial Code, which admittedly would have applied if there had
been a sale of the entire business. He testified that none of its
provisions were complied with because the transaction was not
a sale, but rather a loan.

The parties continued their relationship until April 1978, when
an embezzlement of approximately $100,000 from Romans by
a business associate of the Hills was discovered. The ultimate
responsibility for this loss as between the parties was not an is-
sue at trial. It appears from the record that this was by agree-
ment of the parties.

Upon discovery of the embezzlement, Okay refused to advance
any more funds to Romans. According to the Hills, it was at this
point in time that they first learned of Okay’s contention that
their transaction was a loan rather than a sale. The Hills con-
tinued to operate Romans through 1974, when they finally were
financially unable to continue the business.

The Hills instituted this action against Okay to recover the

es 331

purchase price allegedly owed them for the sale of their business,
to recover compensation for the services they rendered on behalf
of the business after the sale, and for indemnity from Okay for
the claims of Romans’ creditors. The Hills later amended their
complaint to include a claim against Ranta for professional mal-
practice. Okay cross-claimed against Ranta, also asserting a
claim for malpractice.

The case was tried to both the court and jury. A special ver-
dict was submitted to the jury, and the trial court made addi-
tional findings of fact and conclusions of law incorporating the
jury’s findings. The special verdict and findings of the trial court
are set forth in the appendix to this opinion. The jury returned
a verdict favorable to the Hills in all respects and adverse to
Okay. Additionally, it found that Ranta was negligent with re-
spect to his representation of both the Hills and Okay.

The issues on appeal are:

1. Was the evidence sufficient to support the jury’s verdict
and the trial court’s findings?

2. Did the trial court properly submit the issue of Ranta’s neg-
ligence to the jury by its special verdict?

8. Were the supplemental findings of fact made by the trial
court proper and consistent with the jury’s verdict?

4. Were the trial court’s conclusions of law properly drawn
from the findings of fact?

Before we discuss each of these issues, some preliminary com-
ments are necessary. It must be kept in mind that at trial three
legally distinct, albeit factually related, claims were at issue.
First, there was the nature of the business transaction between
the Hills and Okay. A resolution of this claim would determine
in large part the posture of the parties when the second and third
issues were confronted by the court and jury. These latter two
issues involved the alleged legal malpractice of Ranta with re-
spect to his representation of the Hills and Okay. It is with this
formulation of the claims at bar in mind that we review the is-
sues raised on appeal.

332 Es

Hl Sufficiency of the evidence.

Viewing the evidence as a whole, we find that it supports. the
special verdict of the jury and the findings of the trial court ‘with
respect to both the business relationship between the Hills and
Okay and Ranta’s negligent representation of the Hills and Okay.

The jury and the trial court found that the transaction was,
in every respect, as the Hills contended. Specifically, Okay con-
tends that because all of the essential terms. to the transaction
between it and the Hills were not agreed upon, the jury could
not have found. that there was a valid contract of sale. We hold
that the evidence was sufficient to support the jury’s determina-
tion.

The test of contractual formation is an objective one, to be
judged by the words and actions of the parties and not by their
subjective mental intent. See, 4 Dunnell, Dig. (8 ed.) § 1742. In
order for a contract to be specifically enforced, it is not neces-
sary that the parties agree on every possible point, but rather,
the law requires merely that the parties’ intent as to the funda-
mental terms of the contract can be ascertained with reasonable
certainty. Furuseth v. Olson, 297 Minn. 491, 210 N. W. 2d 47
(1973); Kennedy v. Hasse, 262 Minn. 155, 114 N. W. 2d 82
(1962).

We have already discussed the evidence in detail. Viewing that
evidence in the light most favorable to the verdict, these basic
terms of the agreement are ascertainable:

(1) The Hills would convey to Okay all of the assets of Ro-
mans, including the building and furniture and all accounts re-
ceivable;

(2) In return, Okay would pay to the Hills the sum. of
$30,000 and assume all of the ‘accounts payable of Romans;

(3) Roger Hill would continue to supervise the day-to-day
operation of Romans, subject to the general control of Okay;
however, all expenditures required specific approval of Okay;
and

(4) Okay would grant to the Hills an option to repurchase

ee 333

the business at some time in the future, for whatever amount
of capital Okay had invested in the business, plus 10 percent per
annum. as a premium to account for the increased value of the
assets of the business due to inflation.

Okay seeks to establish from portions of the Hills’ testimony
that there was no agreement, but merely an agreement to agree
which was indefinite as to certain material terms such as time
for performance. However, the Hills were adamant that the basic
transaction outlined above had been consummated. Additionally,
the jury had for its consideration the testimony of all the other
witnesses and the evidence of the conduct of the parties. While
no time limitations were ever discussed, where a contract is silent
as to the time of performance, the general rule is that the con-
tract must be performed within a reasonable time. This omission
alone will not defeat the formation of a contract. The law does
not favor destruction of a contract for indefiniteness. King v.
Dalton Motors, Inc. 260 Minn. 124, 109 N. W. 2d 51 (1961);
Furuseth v. Olson, supra. That maxim is especially true where,
as here, there has been such extensive performance on the part
of both parties.

Ranta contests the sufficiency of the evidence as it relates to
the second and third claims at bar, namely his allegedly negligent
representation of the Hills and Okay. Specifically, he contends
that there was insufficient expert testimony presented to the
jury to enable it to render a competent judgment of his conduct.

The record reveals that Ranta graduated from the Law School
of the University of Minnesota in 1942. He worked for a number
of years as a tax examiner for the Minnesota Department of Tax-
ation, and subsequently did tax and accounting work for a firm
of certified public accountants in Minneapolis. In 1948 he entered
private law practice and has been practicing in Minneapolis ever
since. His practice consists mainly of tax and corporate matters.

The facts of his early encounters with the Hills and his exist-
ing relationship with Okay have already been stated. Ranta testi-
fied that when he first suggested to the Hills that one of his other

834 —

clients (Okay) was interested in entering into a business trans-
action, with them, he specifically asked them if they wanted the
same attorney to represent them as had represented them when
they purchased the Cedar Avenue property and in their attempt
at incorporating the business of Romans. According to Ranta,
the Hills wanted to know whether separate representation was
necessary. He told them it would not be absolutely necessary and
advised them in very general terms “that there might be some
developments with reference to it that it might be well for them
to have their own counsel.” According to Ranta, the Hills none-
theless consented to his dual representation.

The Hills’ testimony on this point differs substantially from
Ranta’s. Roger Hill testified that at no time did Ranta ever ad-
vise him or his wife of any possible conflicts of interest that
might arise as a result of his dual representation of the Hills and
Okay. He further testified that Ranta advised them that it would
be “convenient” if Ranta represented both the Hills and Okay,
because he was more familiar with both situations.

Judith Hill’s testimony was similar to that of her husband.
She testified that sometime in June she called their former at-
torney to find out whether it was proper for an attorney to repre-
sent both sides, He indicated to her that it was very unusual, but
declined to render any further opinion. Mrs. Hill also testified
that she then went to Ranta and indicated that she and her hus-
band wanted to be represented by another attorney. According
to her testimony, Ranta told her that it was not unusual for an
attorney to represent both parties to a transaction such as was
being contemplated and that it would in fact “be to the benefit
of all the parties involved” if he represented both the Hills and
Okay. It was at this point, she testified, that the Hills agreed to
Ranta’s representing them.

There is no evidence in the record to show whether Okay ap-
proved of Ranta’s dual representation.

Both the Hills and Kvasnicka testified that on more than one
occasion they requested some written agreement or documenta-

ee 335

tion from Ranta. Kvasnicka testified that he was present when
Roger Hill requested a written agreement from Ranta. The Hills
both testified that Ranta’s response was always that an agree-
ment would be forthcoming. No agreement or any evidence of
indebtedness, however, was ever prepared. Ranta himself ad-
mitted that the Hills and Kvasnicka requested that the agree-
ment be reduced to writing and that he assured them it would
be done.

Ranta, while able to explain precisely the nature of the trans-
action, testified that he had two reasons for not reducing the
agreement to writing. First, he believed there was the possibil-
ity that a written agreement would be more accessible to any
judgment creditors the Hills might have than one that was mere-
ly oral. Second, he felt that the arrangements never stabilized
to the point where it was practicable to reduce the terms to writ-
ing. He did admit that Okay received no benefit from the fact
that the agreement was never reduced to writing, but asserted
that Okay was fully protected by virtue of holding title to the
building.

Kvasnicka and Ranta testified that Kvasnicka specifically re-
quested that Okay be protected from claims of Romans’ credi-
tors, and that Ranta was instructed to ensure such protection.
Kvasnicka testified that when he requested “some type of legal
protection so no repercussions could be suffered by the Parent
Company,” he had no specific steps in mind, but rather was re-
lying on Ranta’s judgment. Ranta admitted understanding that
he was to protect Okay from Romans’ general creditors. None-
theless, the jury found that Ranta approved and authorized the
distribution of the two financial profiles.

Both the Hills and Ranta offered expert testimony from local
attorneys on the issue of Ranta’s negligence. The Hills’ expert
testified that, in his opinion, dual representation in a circum-
stance such as this would be likely to adversely affect the rights
of the parties, Ranta’s expert testified that, assuming a full dis-
closure of possible conflicts of interest and consent of all the par-

336 ee

ties, such dual representation would be within the standards of
practice of the local legal community. Both expert witnesses
gave their opinions as to whether or not Ranta conformed. with
the standard of conduct of the community with respect to docu-
menting the transaction between the parties. The Hills’ expert
testified that the standard of care, in his opinion, required that
the transaction be documented. Ranta’s expert testified that the
decision as to whether and when to reduce an agreement to writ-
ing was a matter of judgment for an attorney.

Ranta argues that since no expert testimony was offered as
to what standard of care pertained to the approval of the finan-
cial profiles by Ranta and whether or not he deviated from that
standard, the jury’ was not competent; to find that this act
amounted to negligence. It is clear that this. argument of insuf-
ficient expert testimony extends only to Okay’s claim of negli-
gence against Ranta. The financial profiles were not germane
to the claim of negligence made by the Hills, whose allegations
encompassed specifically Ranta’s dual representation and failure
to document the transaction. On these aspects, sufficient expert
testimony was elicited. With this testimony in mind, the jury
could and did evaluate Ranta’s conduct. The jury was free to
weigh the evidence, and that evidence fully supports the jury’s
finding of negligence on Ranta’s part in the manner in which
he represented the Hills.

Central to Okay’s claim of negligence was Ranta’s failure to
adequately insulate Okay from Romans’ creditors. It is difficult
to imagine how this claim could not encompass the approval of
the financial profiles.

None of our prior decisions in actions regarding legal mal-
practice have directly addressed the issue of the need for expert
testimony in cases based on negligence. The cases collected in
Annotation, 17 A. L. R. 3d 1442, indicate some states have
adopted the same standard with respect to the need for expert
testimony in legal malpractice cases that they have adopted in
medical malpractice cases—that expert testimony is generally

De 337
necessary except where the matters in issue fall within the area
of common knowledge and lay comprehension.

In cases of medical malpractice, this is also the standard ap-
plied in Minnesota. Generally, the plaintiff must introduce ex-
pert testimony as to the standard of care and the defendant doc-
tor’s departure from it. Failure to do so would leave only the
jury’s speculation as the basis for a verdict. Lhotka v. Larson,
307 Minn. 121, 288 N. W. 2d 870 (1976) ; Hestbeck v. Hennepin
County, 297 Minn. 419, 212 N. W. 2d 861 (1973). However, such
expert testimony is not necessary when the matters to be proven
are within the area of common knowledge and lay comprehen-
sion. Hestbeck v. Hennepin County, supra.

Logic dictates that this same standard should be adopted in
cases of legal malpractice. Expert testimony should be generally
required to establish the standard of care applicable to an attor-
ney whose conduct is alleged to have been negligent and further
to establish that his conduct deviated from that standard. That
general rule should be subject to the exception that such expert
testimony is not necessary in cases where the conduct complained
of can be evaluated adequately by a jury in the absence of expert
testimony.

Applying this rule to the instant case, because the jury unques-
tionably considered Ranta’s approval of the financial profiles
in determining his negligence (see discussion below), and be-
cause there was no expert testimony regarding the propriety of
Ranta’s conduct in approving the financial profiles, in order for
the jury’s finding to stand we must be able to state that the jury
was competent to evaluate that conduct without the aid of expert
testimony. See, Raymond v. Baehr, 282 Minn. 102, 163 N. W.
2d. 54 (1968). In view of the evidence as a whole, we hold that
the jury could properly evaluate that conduct.

The jury found as fact that Ranta approved the execution and
dissemination of the financial profiles. The testimony was uncon-
tradicted, and the court found that Okay had instructed Ranta
to protect it from the claims of Romans’ creditors. The impact

338 ee

of the financial profiles is obvious to any layman. The Hills rec-
ognized, as did the suppliers who received the profiles, that the
profiles meant Okay would share responsibility for the debts in-
curred with Romans. If that were not obvious, the profiles would
not have been necessary. Expert opinion would add nothing to
that conclusion.

Whether Ranta’s conduct in approving the profiles was nulli-
fied by Kvasnicka’s subsequent personal approval is a separate
question relating to causation. The parties stipulated that on that
issue the jury was competent to render a finding. We note, how-
ever, that in so acting, Kvasnicka was relying on advice given
him by Ranta.

Ranta’s further argument that there was insufficient proof
of causation under the “but for” rule of causation of Christy v.
Saliterman, 288 Minn. 144, 179 N. W. 2d 288 (1970); and
Meagher v. Kavli, 256 Minn. 54, 97 N. W. 2d 370 (1959), is not
well founded. That rule was enunciated with respect to the test
of causation to be applied in the case of an attorney’s negligence
destroying his client’s cause of action. The client-plaintiff is re-
quired to establish the value of what was lost through his attor-
ney’s negligence; i.e., that he had a meritorious cause of action
originally. Such a rule is only common sense. The instant case,
however, deals with more traditional concepts of proximate
cause. There are no underlying causes which the plaintiff must
establish.

In conclusion, it appears that the evidence was sufficient to
support the jury’s verdict as it pertained to Ranta’s negligence.
An attorney who undertakes to represent at the same time ad-
verse parties in any type of legal relationship, whether contrac-
tual or otherwise, does not obligate himself to adhere to any high-
er duty or standard of care than if he endeavored to represent
only one of those parties. On the other hand, he clearly owes no
lesser duty to each of his cients, and he must protect the inter-
ests of each as zealously as if their interests were his sole respon-
sibility. In undertaking to represent both the Hills and Okay,

— 339

Ranta placed himself in a position which, by its very nature,
made it more difficult for him to conform to the required stand-
ard of practice in protecting his clients’ interests. In the opinion
of the jury, Ranta failed both clients. We must accept that judg-
ment.

Hl Propriety of special verdict.

On appeal, Ranta asserts that his counsel requested separate
jury findings on each of the following five acts of negligence he
contends he was charged with in the Hills’ amended complaint
and the cross-claim of Okay:

(1) Representation of both parties to the Okay-Romans
transaction without adequate disclosure of the potential conflicts
of interest in such an arrangement;

(2) Failure to prepare written documentation of the Okay-
Romans agreement;

(8) Failure to adequately insulate Okay from the claims of
Romans’ creditors;

(4) Failure to adequately investigate the Hills’ financial
background ;

(5) Approval of the execution of the financial profiles.
Ranta contends that the trial court improperly refused to submit
to the jury specifically requested interrogatories concerning
these allegations.

The special verdict form proposed by Ranta’s counsel to the
trial court contained two separate interrogatories regarding neg-
ligence. One asked whether Ranta was negligent in failing to ob-
tain written consent to his dual representation from his clients.
The other asked whether he was negligent in failing to document
the transaction between the parties. The trial court refused these
requests, and instead presented to the jury, with appropriate in-
structions, one general interrogatory regarding Ranta’s negli-
gence and two questions on causation—one regarding the Hills’
damages and the other regarding Okay’s.

Pursuant to Rule 49.01, Rules of Civil Procedure, a trial judge

340 a

may decide to submit a special verdict to a jury, rather than a
general verdict. Under prior Minnesota practice, the decision
as to which form of verdict to use was controlled by the nature
of the action, and a special verdict was available only in an action
‘for the recovery of money and then only if the jury, in its discre-
tion, decided to render such a verdict. Rule 49.01 liberalized that
former practice by leaving it to the discretion of the trial court
whether to submit the case on a special verdict or not. Worms-
becker v. Donovan Construction Co. 247 Minn. 32, 76 N. W. 2d
643 (1956). Not only does the trial court have the discretion to
decide whether or not to use a special verdict, but it is possessed
of broad discretion as to what form that special verdict is to take.
Thielbar v. Juenke, 291 Minn. 129, 136, 189 N. W. 2d 493, 498
(1971), citing McDonnell v. Timmerman, 269 F. 2d 54 (8 Cir.
1959); 2 Hetland & Adamson, Minnesota Practice, Civil Rules
Ann. ip. 289. The Eighth Circuit Court of Appeals, in McDonnell
v. Timmerman, 269 F. 2d 54, 58, observed that the formulation
of the verdict by the court is a proper exercise of that discretion
if the questions propounded fairly and adequately cover all of
the issues of fact raised by the pleadings and proof. Such ques-
tions as are raised by the pleadings and evidence which are im-
portant to the judgment to be rendered must be submitted to the
jury. Wormsbecker v. Donovan Construction Co. 247 Minn. 32,
47, 76 N. W. 2d 648, 653.

The rationale for this requirement that the special verdict en-
compass all questions of material fact is to ensure the parties
their constitutionally guaranteed right to a jury trial. The ques-
tions submitted to the jury need not be questions of pure fact,
but, in the discretion of the trial court, may be in the form of ulti-
mate fact questions. See, Thielbar v. Juenke, 291 Minn. 129, 186,
189 N. W. 2d 498, 498, and cases cited therein. While in certain
cases it may be more desirable to have the jury determine evi-
dentiary rather than ultimate facts, Thielbar v. Juenke, supra,
in negligence cases the jury may draw the inference from those
facts as to whether or not the applicable standard of care has

| 341

een breached. Cooper v. Friesen, 296 Minn. 160, 207 N. W. 2d
742, (1978) ; Stenzel v. Bach, 295 Minn. 257, 208 N. W. 2d 819
(1978). See, generally, 18B Dunnell, Dig. (3 ed.) § 7048,

The issues of material fact which were raised by the pleadings
and evidence adduced at trial appear to be these:

(1) What was the nature of the business transaction between
the Hills and Okay?

(2) Was Ranta negligent in his representation of the Hills,
and if so, what damages resulted from that negligence?

(3) Was Ranta negligent in his representation of Okay, and
if so, what damages resulted from that negligence?

As to the first issue, the court and the parties were in agree-
ment as to that portion of the special verdict which covered the
nature of the transaction itself. All of the suggested special ver-
dict forms were in substantial harmony with that portion of the
verdict the court finally submitted dealing with this issue, and
no objections to this portion of the verdict are found in the rec-
ord. The issue is raised on appeal only insofar as the parties chal-
lenge the sufficiency of the evidence to support the jury’s find-
ings.

The issue of Ranta’s negligence with respect to the Hills was
not that he represented both them and Okay and not that he
failed to document ‘their transaction, but rather that, as his
clients, he failed to protect their interests. Like failure to yield
the right of way, excessive speed, and improper lookout in an
ordinary automobile negligence case, Ranta’s dual representation
and his failure to document the transaction were merely eviden-
tiary facts which provided a basis for the jury’s finding of negli-
gence. As such, the trial court did not err in refusing to submit to
the jury the individual questions of whether Ranta was negligent
because of his dual representation and his failure to reduce the
agreement to writing.

The same analysis applies to the claim that Ranta negligently
failed to protect the interests of Okay. However, in this regard,
there is the additional issue of the disputed financial profiles.

342 es

On appeal, Ranta’s counsel argues that, despite the jury’s finding
that Ranta approved the execution and dissemination of the pro-
files, there was no finding by the jury that this constituted negli-
gence and that the absence of such a specific finding is reversi-
ble error. It is evident that Ranta’s failure to protect Okay’s
interests from the claims of Romans’ creditors subsumes his ap-
proval of the financial profiles. Thus, in determining whether
or not Ranta was negligent in his representation of Okay, the
jury considered the evidentiary facts of his. dual relationship,
his failure to document the transaction, and his approval of the
financial profiles, and drew the conclusion of ultimate fact that
Ranta’s conduct was negligent. As the discussion above shows,
there was sufficient evidence presented on all of these individual
fact issues to enable the jury to make this determination. The
trial court, in its scheme of presentation of the case to the jury,
asked the jury whether Ranta was negligent, and if so, whether
that negligence caused Okay damages in the form of expenses
in defending the lawsuits brought by Romans’ creditors. If the
answer to both questions was “yes,” ithen the other damages
claimed by Okay from Ranta, namely indemnification for the
actual amounts claimed by the creditors of Romans, logically
follow.

For these reasons we feel that a separate finding by the jury
that Ranta was negligent in approving the financial profiles was
not necessary. Additionally, the record reveals that the trial
court was never requested to have the jury make a specific find-
ing as to the character of Ranta’s conduct in approving the fi-
nancial profiles. ‘The interrogatory submitted by the court re-
garding this act was substantially the same as that requested by
Ranta. It must be kept in mind that the facts of Ranta’s dual rep-
resentation and his failure to document the transaction were not
contested, and it was not necessary for the jury, in making the
ultimate determination of negligence, to find these evidentiary
facts. Whether or not Ranta approved the financial profiles was,
on the other hand, disputed. By having the jury indicate its find-

— 343

ing on this point, the court was provided with verification of the
jury’s determination of this evidentiary fact.

We believe that it might well have been preferable to ask the
jury separate questions concerning Ranta’s negligence with re-
spect to the Hills and with respect to Okay. Conceivably the jury
could have found that Ranta was negligent in his representation
of one party but not of the other. However, this difficulty is over-
come by the separate questions relating to damages suffered by
each party because of Ranta’s negligence. It does not appear that
the jury was confused by the formulation of the interrogatories
by the trial court, and their determination of the material issues
can readily be ascertained from the answers made to those inter-
rogatories. .

Similarly, although it might have been appropriate for the
trial court to present to the jury an interrogatory regarding the
comparative negligence, if any, of the other parties, such an in-
terrogatory is not required under Minn. St. 604.01, subd. 1, in
the absence of a demand from one of ‘the litigants. The record
fails to reveal such a demand.

The trial court fully and adequately covered the material facts
of negligence and causation without itemizing the “acts” of negli-
gence alleged. We cannot substitute our discretion for that of
the trial court.

Finally, Ranta argues that the trial court improperly failed
to distinguish, or have the jury distinguish, between his conduct
as an attorney and his conduct as a business advisor. The record
fails to support Ranta’s allegation that he had acted in the
capacity of a business advisor. First, it appears that Ranta’s
culpable conduct was rendered entirely in a legal context. The
claims made against him are not for bad business judgment but
rather for legal malfeasance, specifically his failure to properly
document the transaction and to properly advise as to the legal
effects of certain other documents. ‘Second, there is nothing in
the record to suggest that counsel for Ranta ever requested that
such a distinction be drawn, either by the jury or by the court.

344 es

The jury very clearly was instructed by the court as to the
proper standard by which an attorney’s conduct must be judged,
and it had only that standard and not some “business judgment”
rule to apply. We find this argument to be without substantial
merit.

Propriety of trial court's findings.

After the jury returned its special verdict, the trial court
adopted those findings as its own and made certain additional
findings. Ranta asserts that those supplemental findings were
improperly made, in that they decided questions of fact which
should have been determined by the jury and were contrary to
the findings ‘which the jury did make.

Under Rule 49.01, Rules of Civil Procedure, the trial court has
the authority to make such additional findings supplementing
a special verdict as are necessary to render a judgment. Ranta’s
argument regarding the court’s findings is premised upon the
contention that the court improperly submitted the case to the
jury. We have rejected this contention. And, if the trial court
properly submitted the issues to the jury, the only question
which remains is whether there is evidentiary support for those
findings of the court which encompass facts not expressly found
by the jury. In examining the court’s findings with an eye toward
the record, it cannot be said that they were clearly erroneous.
The court’s findings merely add necessary, consistent details to
the findings of the jury and are amply supported by the evidence.

Propriety of trial court’s conclusions of law.

Ranta asserts that the trial court’s conclusions of law were
improperly drawn. We find merit in certain of his contentions
and therefore must reverse the lower court’s judgment in part.

Damages were awarded in the amount of $80,000 to the Hills
from both Okay and Ranta. This amount represented the pur-
chase price agreed to by the Hills and Okay ‘for the Cedar Avenue
building and its furnishings. The jury specifically found that
this amount had not been paid to the Hills by Okay. Additional-
ly, the court awarded Okay judgment against Ranta for all sums

ee 845

it had invested in Romans. We feel that both awards, with re-
spect to Ranta, were improper. Ranta’s acts or omissions in no
way affected Okay’s obligation to pay the Hills the agreed-upon
purchase price. Similarly, with respect to the sums invested by
Okay, whether they be characterized as loans or contributions
to capital, Okay clearly understood the risk involved in making
that investment and deemed itself secure by virture of the title
it had obtained to the Cedar Avenue property. Ranta’s conduct
in no way increased or otherwise affected this liability, and the
responsibility for the loss sustained, if any, is solely Okay’s.

The Hills were awarded indemnity from both Okay and Ranta
for the judgments entered against them by Romans’ creditors,
including costs and attorneys fees incurred in defense of those
claims. Okay was awarded indemnity from Ranta ffor the settle-
ment and payment of claims made by Romans’ creditors which
Okay was obligated eventually to satisfy, plus its costs and at-
torneys fees incurred in defending and settling those claims.

In Hendrickson v. Minnesota Power & Light Co. 258 Minn.
368, 104 N. W. 2d 843 (1960), we explained the nature of the
remedy of indemnity. While traditionally indemnity has been
viewed as a right arising out of contract, the award of indemnity
should follow traditional concepts of equity. Sorenson v. Safety
Flate, Inc. 298 Minn. 353, 216 N. W. 2d 859 (1974) ; Hendrick-
son v. Minnesota Power & Light Co. supra.

The law implies a promise of indemnity from a principal to
his agent for any damages resulting from the acts of the agent
in the good faith execution of that agency. See, generally, 1A
Dunnell, Dig. (3 ed.) § 208. The jury found as a fact that Okay
had purchased Romans from the Hills. The trial court found that
the Hills continued to operate the business of Romans as em-
ployees of Okay after that transaction. The trial court properly
concluded that the Hills were entitled to indemnity from Okay
against the claims of Romans’ creditors, because they were its
employees. The Hills are not, however, entitled to indemnity for
any of these amounts from Ranta. This is by virtue of the fact

346 Ee

that, despite Ranta’s negligence, it was ultimately determined
that the transaction between the Hills and Okay was a sale, as
the Hills contended. In that respect, at least, they suffered no
compensable damages and can claim no indemnity from Ranta.

Indemnity may also be granted where the one seeking in-
demnity has incurred liability because of a breach of duty owed.
to him by the one sought to be charged. Sorenson v. Safety Flate,
Inc. supra; Hendrickson v. Minnesota Power & Light Co. supra.
In the instant case, the claims against Okay for the sums owed
Romans’ creditors are a result of Ranta’s negligent conduct, and
indemnity was properly awarded to Okay against Ranta for those
amounts. This is to be distinguished from our refusal to award
Okay indemnity for the sums invested. The loss of the funds ad-
vanced was a risk Okay knowingly assumed when it agreed to
become involved with Romans, whereas the liability Okay faces
from Romans’ creditors. was a risk that was not willingly or
knowingly taken by Okay, but rather was the result of Ranta’s
negligence. Thus, while the possible loss of the investment was
anticipated by Okay, clearly the additional liability was not.

There remains for consideration only the propriety of the trial
court’s award of attorneys fees to the Hills from both Okay and
Ranta and to Okay from Ranta.

When a party defends against a claim which is the responsi-
bility of another party from whom he may recover indemnity,
tender of the defense of that action to the other party is general-
ly a condition precedent to obtaining indemnification for at-
torneys fees incurred in that defense. Sorenson v. Safety Flate,
Ine. 306 Minn. 300, 285 N. W. 2d 848 (1975). The purpose of this
rule is to provide the party from whom indemnity is sought the
opportunity to handle its own defense. In this case it does not
appear from the record that the Hills made any tender to Okay
of the defense of the claims made against them, and they are thus
precluded from claiming indemnity from Okay for the amounts
of their attorneys fees in defending those claims.

— 347

A different standard is applied, however, with respect to the
award of attorneys fees from Ranta. Attorneys fees and expenses
are not generally included in the measure of recoverable damages
for negligence. 5B Dunnell, Dig. (3 ed.) § 2523. An exception is
recognized, however, when the attorneys fees and expenses
claimed are incurred in other litigation which is necessitated by
the act of the party sought to be charged. Prior Lake State Bank
v. Groth, 259 Minn. 495, 108 N. W. 2d 619 (1961) ; Tarnowski v.
Resop, 236 Minn. 33, 51 N. W. 2d 801 (1952); Bergquist v.
Kreidler, 158 Minn. 127, 196 N. W. 964 (1924). In each of those
cases, the plaintiff, because of the tortious conduct of the de-
fendant, was compelled to enter litigation with a third party to
protect his rights. Thereafter, the plaintiff in each case sued the
defendant to recover the costs and attorneys fees incurred in the
prior litigation. Recovery was allowed. Applying that rule to the
instant case, it is clear that both the Hills and Okay should be
entitled to recover from Ranta, as a part of the measure of dam-
ages they suffered due to his negligence, attorneys fees incurred
in defending against the claims of Romans’ creditors. The tender-
of-defense requirement does not apply, since in no event would
Ranta have been liable directly to the third parties.

We thus reverse the judgment against Ranta and in favor of
the Hills for the $30,000 representing the purchase price of
Romans and the award of indemnity to the Hills from Okay for
their attorneys fees. Additionally, we reverse that portion of the
judgment which awards Okay damages from Ranta for the pur-
chase price and the sums it invested in Romans. The remainder
of the judgment which awards the Hills indemnity from Okay
for the claims of Romans’ creditors and: Okay indemnity from
Ranta for those claims, and which awards both the Hills and
Okay their attorneys fees in defending against those claims from
Ranta, is affirmed. .

Affirmed in part, reversed in part, and remanded for further
proceedings.

348 a

“APPENDIX
File No. 699323
FINDINGS oF Fact, CONCLUSIONS oF Law &
ORDER FOR JUDGMENT
ee Re

Issues of fact were submitted to the jury under Special Ver-
dict and they returned special written findings. The issues sub-
mitted to the jury and the answers of the jury thereto were as
follows:

Question No.1: Was the agreement between Okay Construc-
tion Company, Inc., and Roger Hill and Judith Hill a loan trans-
action, or was the agreement for a sale of the business?

loan transaction,

sale of business sale

Question No. 2: If your answer to Question No. 1 was that
the agreement was a loan transaction, then answer these ques-
tions:

(a) Did Roger Hill have a duty to return the inventory held

by him in April of 1973?
Answer: (unanswered)

(b) If your answer to (a) was yes, what damage, if any, did
Okay Construction Company, Inc. sustain by reason of
his failure to do so?
$————— (unanswered)

Question No. 3: If your answer to Question No. 1 was that
the agreement was for a sale of the business, then answer this
question: .

Did the money advanced and used by the Hills constitute pay-
ment for the building?

Answer: No

Question No. 4: Did E. E. Ranta approve the financial pro-
files (Exhibits K and L) and authorize their distribution among
the electric and furniture suppliers?

Answer: Yes ‘

ee 349

Question No. 5: Did Felix Kvasnicka approve the financial
profiles (Exhibits K and L) and authorize their distribution
among the electric and furniture suppliers?

Answer: Yes

Question No. 6: Did Roger Hill misrepresent the approval
of the financial profiles (Exhibits K and L) by E. E. Ranta to
Felix Kvasnicka?

Answer: No

Question No. 7: Did E. E. Ranta fail to exercise the care of
a reasonably prudent attorney in this community under like cir-
cumstances?

Answer: Yes

Question No. 8: If your answer to Question No. 7 was yes,
was such negligence a direct cause of the damages for expenses
incurred by the Hills in the defense of lawsuits brought by credi-
tors?

Answer: Yes

Question No. 9: If your answer to Question No. 7 was yes,
was such negligence a direct cause of the damages for expenses
incurred by Okay Construction Company, Inc., in the defense
of lawsuits brought by creditors?

Answer: Yes

The Court adopts said findings as Findings of Fact, and upon
all of the records, files and proceedings herein, makes the follow-
ing additional Findings of Fact:

FINDINGS OF FAcT

1. That on or about August of 1972 defendant Okay Con-
struction Company, Inc., purchased the business previously
owned and operated by the plaintiffs (said business hereinafter
referred to as Romans) at a purchase price of Thirty Thousand
and 00/100 ($30,000.00) Dollars consisting of plaintiffs’ equity
in certain real and personal property. That defendant Okay Con-
struction Company, Inc., has not paid to plaintiffs any part of
said purchase price. That the plaintiffs’ first demand for pay-
ment thereof was part of plaintiffs’ Complaint herein, the same

350 ee

having been served on, defendant Okay Construction Company,
Inc., on October 1, 1973.

2. That as part of the terms of said purchase, defendant Okay
Construction Company, Inc., granted the plaintiffs and each of
them an option to repurchase said business including the real
and personal property. That plaintiffs have not exercised said
option and have waived their rights thereunder and that said
option has been effectively terminated.

8. That plaintiffs continued after August of 1972 to operate
Romans as employees of defendant Okay Construction Company,
Inc., until January of 1975 at which time the operation of said
business was terminated.

4, That at all times herein material defendant E. E. Ranta
as an attorney at law represented both the plaintiffs and de-
fendant Okay Construction Company, Inc., in the negotiations
for the purchase of the plaintiffs’ business and as legal counsel
for both the plaintiffs and defendant Okay Construction Com-
pany, Inc. in the business relationships which developed and
existed between them and in matters relating to the operation
of Romans.

5. That Okay Construction Company did not intend to incur
any liability to past, present or future creditors of Romans and
instructed Esko Ranta as their counsel to protect them accord-
ingly.

6. That Okay Construction Company did not understand that
they were purchasing the entire business of Romans but believed
that they were making loans and taking title to the building and
personal property as security therefor. That Esko Ranta negli-
gently failed to advise them of such fact.

7. That defendant E. E. Ranta did not document the business
relationship between the plaintiffs and defendant Okay Con-
struction Company, Inc. That defendant E. E. Ranta did not pre-
pare a promissory note or other written document evidencing de-
fendant Okay Construction Company’s indebtedness to plaintiffs
for the purchase of Romans as set forth in Finding No. 1 above

— 351

other than preparing and having executed an assignment of a
contract for deed and a quit claim deed of the realty involved and
a bill of sale for the personal property. Further, as attorney for
the plaintiffs and defendant Okay Construction Company, Inc.,
defendant E, E, Ranta approved certain financial profiles (Ex-
hibits K and L) and authorized their distribution to certain sup-
pliers of audio-stereo equipment and related items.

8. That defendant Okay Construction Company, Inc., pro-
vided substantial capital for the operation of said business, the
exact amount to be determined in supplemental Findings of Fact,
Conclusions of Law and Order for Judgment.

9. That in excess of thirty (30) lawsuits have been com-
menced by certain creditors of Romans for merchandise pur-
chased by Romans for resale. That said lawsuits have been
brought against both the plaintiffs and defendant Okay Con-
struction Company, Inc., with resulting counterclaims and cross-
claims between said parties. That the plaintiffs and defendant
Okay Construction Company, Inc., have incurred certain costs
and expenses in the defense of said lawsuits, a more detailed
Finding to be included in a supplemental Findings of Fact, Con-
clusions of Law and Order for Judgment.

CONCLUSIONS oF LAW

1. That Plaintiffs and each of them are entitled to judgment
against Defendant Okay Construction Company, Inc. and De-
fendant E. E. Ranta in the sum of Thirty Thousand and 00/100
($80,000.00) Dollars plus simple interest at the rate of six (6%)
per cent from and after October 1, 1973.

2. That the Plaintiffs and each of them are entitled to in-
demnity ‘from Defendant Okay Construction Company, Inc. and
Defendant E. E. Ranta for all costs and expenses, including at-
torneys fees, incurred by the Plaintiffs in the defense of credi-
tors’ suits brought against the Plaintiffs, the amount of which
will be set forth in supplemental Findings of Fact, Conclusions
of Law and Order for Judgment to be filed herein.

352 ee

8. That Plaintiffs are further entitled to indemnity as
against Defendant Okay Construction Company, Inc. and De-
fendant E. E. Ranta for any judgments which may be entered
against Plaintiffs individually as a result of said creditors’ suits.

4, That Defendant Okay Construction Company, Inc. is en-
titled to indemnity from Defendant E. E. Ranta for all costs and
expenses including attorneys fees incurred in connection ‘with
the creditors’ suits, the amount of which will be set forth in sup-
plemental Findings of Fact, Conclusions of Law and Order ‘for
Judgment to be filed herein.

5. That Defendant Okay Construction Company, Inc. is en-
titled to indemnity from Defendant E. E. Ranta for all money
paid or to be paid on behalf of Defendant Okay Construction
Company, Inc. in the settlement and payment in connection with
the claims of creditors as set forth in the creditors’ suits.

6. That Defendant Okay Construction Company, Ine. is en-
titled to indemnity from Defendant E. E. Ranta for all money
expended by Defendant Okay Construction Company, Inc. in con-
nection with Defendant Okay Construction Company’s involve-
ment with the business known as Romans, the amount of which
will be set forth in supplemental Findings of Fact, Conclusions
of Law and Order for Judgment and upon payment thereof by
Defendant E. E. Ranta, Defendant E. E. Ranta shall be entitled
to an assignment of Defendant Okay Construction Company’s
interest in the Real property to be more specifically identified
in supplemental Findings of Fact, Conclusions of Law and Order
for Judgment.

ORDER FOR JUDGMENT
Let JupGMENT BE ENTERED ACCORDINGLY.
BY THE Court:
/8/ JONATHAN LEBEDOFF
Judge of District Court
Dated: Aug. 21, 1975.

| 353

IN RE PETITION OF DAKOTA COUNTY
ABSTRACT COMPANY v. SAMUEL L. RICHARDSON.

252 N. W. 2d 124,

March 18, 1977—No. 46673.

eS,

EE ee

Warren Spannaus, Attorney General, Richard B. Allyn, Solici-
tor General, and Erica Jacobson, Special Assistant Attorney Gen-
eral, for appellant.

Schoen & Jones and Harry P. Schoen, for respondent.

ee

SHERAN, CHIEF JUSTICE.

This is an appeal by the former state human rights commis-
sioner from a decision of the district court modifying an order
of the Minnesota Human Rights Department. We reverse the
district court, and remand with instructions that the depart-
ment’s order be reinstated.

This appeal involves the setting aside of an allowance.of pack-
pay to an individual found to have been discriminated against
in her employment by reason of her sex.

Laurilee Martin was first employed by respondent Dakota
County Abstract Company in January 1964. Her duties consisted
primarily of indexing the recorded transfers of real property.

In January 1965, the company adopted a resolution requiring
all male nonofficer employees to retire at age 65 and all female
nonofficer employees to retire at age 62. The purpose of the
resolution was to adopt what was then believed to be the existing
standards for retirement eligibility under the Federal Social
Security Act.

In January 1972 Ms. Martin had reached 61 years of age, and
the company notified her of the retirement policy so that she
would have 1 year to plan her retirement.

Being in some doubt about the legality of the retirement policy,
Ms. Martin made inquiries at the Human Rights Department
about a week after she had been shown the company’s resolution.
At some time while being in contact with the department she

— 355

signed a charge against the company alleging discrimination by
reason of the retirement policy. She instructed the department
that she did not want the charge processed. until she so notified
the department. That request notwithstanding, on Friday, March
10, 1972, the department sent a copy of the charge to the com-
pany, which was received early the next week. Upon receipt of
the charge, the employer by letter terminated Ms. Martin’s em-
ployment. The company’s president stated that he considered the
filing of the charge to be an act of disloyalty; that he had been
a good employer, and in addition to allowing her sick leave, often

- intervened in her behalf in her disputes with fellow employees.
He was “hurt” by her filing the charge.

Thereafter in June 1972 a new charge was issued by the de-
partment alleging that the discharge was an act of reprisal con-
trary to Minn. St. 363.08, subd. 7(1).

The commissioner made a limited effort at promoting some
conciliation between the parties, consisting of only one meeting
between the employer, the employee, and their respective counsel
in November 1972. This meeting resulted in the company’s mak-
ing an offer to the employee of $500 to settle her claim, which
offer was summarily rejected. No further conciliation attempts
were undertaken by the department.

Thereafter in May 1973 the matter was heard by a department
hearing examiner. The findings and conclusions of the hearing
examiner were filed in March 1974. In summary, the hearing
examiner found that the discharge of the employee was in re-
taliation for the filing of her complaint and that the compulsory
retirement policy constituted an illegal employment discrimina-
tion on the basis of sex. The hearing examiner concluded that
the company’s retaliatory termination of Ms. Martin’s employ-

1 Minn. St. 363.06, subd. 5, provides: ‘The commissioner, in complying
with subdivision 4, shall endeavor to eliminate the unfair discrimi-
natory practice through education, conference, conciliation and persua-
sion at the place where the practice occurred, or the respondent resides
or has his principal place of business.” .

356 ee

ment was contrary to Minn. St. 363.08, subd. 7(1). Ms. Martin
was awarded back wages in the amount of $3,882.76, consisting
of her net monthly wage between the date of the termination and
the date of the hearing, less amounts she received as unemploy-
ment compensation.

The company then brought a petition in the district court seek-
ing review of the hearing examiner’s decision pursuant to Minn.
St. 15.0425. Upon review, the district court vacated the award
of backpay. The court based this determination upon a finding
that the employee would not have continued her employment be-
yond the termination date in any event. While there was some
evidence in the record to support this inference,” the hearing
examiner specifically found that the discharge was retaliatory,
and, inferentially, that the employee would have continued in
her employment absent the termination.

There can be no doubt from the record that this was a retalia-
tory discharge, impermissible under the Minnesota Human
Rights Act. Upon finding such an unfair discriminatory practice,
the department or its hearing examiner is empowered by statute
to award compensatory damages to the aggrieved employee.
Minn. St. 363.071. By the terms of the statute, such an award
is discretionary. Upon review by the district court, the depart-
ment’s action is not to be set aside unless it is arbitrary or
capricious, or unsupported by substantial evidence in view of
the entire record as submitted. Minn. St. 15.0425. The district
court must not substitute its view of the evidence for that
adopted by the hearing examiner if the record supports the hear-
ing examiner’s determination. Ekstedt v. Village of New Hope,
292 Minn. 152, 193 N. W. 2d 821 (1972). Here there was ample

2 There was conflicting testimony presented to the hearing examiner
as to whether on March 10, 1972, the employee removed from her desk
certain items of personal property such as a sweater, a dictionary, and
a coffee cup. She did not report for work on the following Monday or
Tuesday, reporting that she was ill on Monday. She received the termi-
nation letter on Tuesday, March 14 by special delivery mail.

— 857

evidence to support the conclusions of the hearing examiner that
the discharge was retaliatory and that the employee would have
continued her employment absent that discharge. On these facts,
the award of backpay less sums received for unemployment com-
pensation was a proper exercise of the examiner’s discretion, both
as to the award itself and as to its method of calculation. The
trial court erred in substituting its own view of the evidence and
its discretion for that of the hearing examiner, and accordingly
the order must be reversed.

Counsel for appellant urge us to go beyond merely reinstating
the order of the hearing examiner and to hold that the employee
should have been awarded benefits in addition to backpay, such
as the amount of the contributions which the company would
have made to the retirement and insurance plans which the em-
ployee had participated in. It would be sufficient for us to again
state that the nature and amount of compensatory benefits to
be awarded an aggrieved employee are within the discretion of
the hearing examiner, and any determination made in that re-
gard may be modified only if arbitrary or unsupported by the
evidence. But beyond that, it appears that this issue is not
properly before us.

Under our decision in Minnesota Department of Highways
v. Minnesota Department of Human Rights, 308 Minn. 158, 241
N. W. 2d 310 (1976), it is clear that appellant could not have ap-
pealed the order of its own hearing examiner to the district
court; it could, however, urge the district court to affirm the
hearing examiner’s determination, which it did. The right to ap-
peal from the hearing examiner’s order belongs to the employee,
if aggrieved, not to the department. Ms. Martin did not exercise
that right to appeal. When a district court reverses the decision
of a hearing examiner which favored an agency, a “substantial
right” of the agency is affected and the agency may appeal to
this court. Minn. St. 363.10; Minnesota Department of Highways
v. Minnesota Department of Human Rights, swpra. In this ap-
peal, however, the department is in effect attempting to appeal

858 EE

the determination of its own hearing examiner, albeit in the
guise of an appeal from the district court’s order, by urging that
it was error for the district court not to make certain additions
to the hearing examiner’s order. This the agency may not do. It
may, consistent with the statutory scheme for review on appeal,
seek only to have the hearing examiner’s order affirmed by the
trial court or reinstated by this court. We are not willing, at this
time, to reverse this general rule as enunciated in the Minnesota
Department of Highways case.

Respondent contends that it was the conduct of the Human
Rights Department itself, rather than the company, which really
caused the injustice to the employee. The company points to
the fact that formal charges were initiated by the department
without the consent of the employee, and that these proceedings
took over 2 years before the department, with only a meager at-
tempt by the department to aid the resolution of the matter by
conciliation. While we do not express approval of the conduct
of the department in the handling of this case, we do not find
sufficient justification therein to reject the recommendation
of the hearing examiner.

For the reasons stated, the district court’s order is reversed,
and the matter is remanded with instructions that the order of
the hearing examiner be reinstated.

IN RE PETITION OF SUMMIT HOUSE APARTMENT
COMPANY vy. COUNTY OF HENNEPIN AND ANOTHER.

253 N. W. 2d 127.
March 18, 1977—No. 46796.

BC

A 359
a

L |
Leonard, Street & Deinard, Harold D. Field, Jr., and Edward
M. Moersfelder, for appellant.
Gary W. Flakne, County Attorney, and David E. Culbert, As-
sistant County Attorney, for respondent county.
Warren Spannaus, Attorney General, and Thomas K. Over-
ton, Special Assistant Attorney General, for respondent state.

Heard before Rogosheske, Kelly, and Todd, JJ., and considered
and decided by the court en banc.

ROGOSHESKE, JUSTICE.

Summit House Apartment Company, the owner-taxpayer of
certain apartment buildings, seeks a judicial determination of
its claim of illegal assessment of the property for taxes payable
in 1975.1 The sole issue raised on appeal is whether L. 1973, c.
590, enacted in May 1973 and now encoded as Minn. St. 273.13,
subd. 20, which created a new classification for certain apart-
ment buildings by reducing their assessed value from 40 percent
to 25 percent of market value, was intended to be effective for
taxes payable in 1975 or 1976. The trial court in denying the tax-
payer’s motion for partial summary judgment ruled that the re-
duction was intended to be effective as to assessments made in

1 This special proceeding is authorized by Minn. St. 278.01.

360 Es

1975 for taxes payable in 1976. Upon application of the taxpayer,
the trial court certified the issue as important and doubtful. Rule
103.03(i), Rules of Civil Appellate Procedure. We affirm the
decision of the trial court.

The taxpayer owns two high-rise apartment buildings with
surrounding areas and grounds. These building were constructed
and put to use some years prior to 1973 and were assessed as of
January 2, 1978, at a market value of $5,593,500. Pursuant to
Minn. St. 278.18, subd. 19, the city assessor reduced that value
by a 40-percent classification percentage to determine its as-
sessed value for the purpose of levying and collecting the real
estate taxes payable in 1975. The taxpayer, relying on the stat-
ute’s effective-date provision of January 1, 1975, (L. 1978, c. 590,
§ 2) argues that the reduced classification percentage of 25 per-
cent should be applied for determining the assessed value for
taxes payable in 1975. L. 1973, c. 590, provides in relevant part:

“That portion of real property subject to a general property
tax and assessed as a structure upon the land shall, when such
structure is constructed with materials meeting the requirements
for type I or II construction as defined in the state building code,
90 percent or more is used or is to be used as apartment hous-
ing, and no part of which is subject to the provisions of subdivi-
sions 7 and 17, of this section, be classified for the purposes of
taxation for a period of 40 years from the date of completion of
original construction, or the date of initial though partial use,
whichever is the earlier date, as follows: (a) When such struc-
ture is of a height of five or more stories that part, section, floor
or area used or to be used for apartment housing shall be valued
and assessed at 25 percent of the market value thereof * * *,

“Sec. 2. This act is effective January 1, 1975.”

It is undisputed that the taxpayer’s apartment buildings meet
the construction and use criteria of '§ 273.18, subd. 20. On this
appeal, the issue is simply whether the reduced classification per-
centage of 25 percent is intended to apply initially to qualifying

Be

ee 361
structures “valued and assessed” in 1974 for taxes payable in
1975 or to those “valued and assessed” in 1975 for taxes payable
in 1976. :

We first observe that § 278.18, to which subd. 20 was added
in 1978, deals exclusively with the subject of classifying property
for the purposes of assessing and valuing property subject to
taxation. It contains no provision with respect to the levying or
collection of taxes. The obvious legislative purpose of § 273.18,
subd. 20, was to add a new classification and to provide a tax in-
centive to stimulate the quality construction of high-rise apart-
ment buildings. Under our statutory scheme, classification is a
part of the process of assessing the value of property, which is
primarily the assessor’s responsibility subject to sequential re-
view by local, county, and state boards of review or equaliza-
tion, and by the commissioner of revenue. § 273.11. It is only
after completion of the assessment process that the auditor cal-
culates the tax and compiles tax lists. By October 16, these lists
are deemed complete and all taxes extended, subject to the audi-
tor’s limited authority to make changes in the tax lists. § 275.28,
subd. 1. The auditor is then required to deliver the tax lists to
the treasurer for collection on or before the first Monday in
January of the taxable year. § 276.01. Under this statutory proce-
dure there is, therefore, a one-year lag between the assessment
and the collection of real estate taxes.

The taxpayer contends, however, that even though the January
1, 1975, effective date for § 273.18, subd. 20, may have prevented
the assessor from reclassifying the apartment buildings by
October 16, 1974, the function of the county auditor was not com-
plete until the first Monday in 1975, which was January 6. Be-
cause § 275.28, subd. 1, and § 276.01 vest the auditor with limited
authority to make necessary changes in the tax lists after they
are completed but before they are delivered to the county treas~-
urer, petitioner argues that the auditor had the power and duty
to apply the 25-percent classification to the property prior to the
delivery of the tax list to the treasurer for collection of 1975

362 ee

taxes, Additionally, the taxpayer contends that the effective date
provision of § 273.18, subd. 20, is ambiguous and that any
ambiguity, according to our well-settled principles of tax-law
construction, should be resolved in favor of the taxpayer.

The weakness of the taxpayer’s primary argument is that it
rests on the erroneous assumption that the auditor has the statu-
tory authority to classify property. This court has historically
drawn a sharp distinction between the function of the assessor
and that of the auditor. The assessor is entrusted with the re-
sponsibility of assessing property for the purpose of determining
its value for taxation. In re Calhoun Beach Holding Co. 205
Minn. 582, 287 N. W. 317 (1989). In contrast, the auditor has
the duty of calculating and assessing the taxes once the taxable
value has been determined by the assessor. Trask v. Skoog, 188
Minn. 229, 164 N. W. 914 (1917).?-

For several reasons the task of classification, as a part of the
assessment. process, is designed to rest with the assessor as op-
posed to the auditor. First, since 1913 the taxable value of real
estate has not been its market value; rather, property has been
classified in various categories and taxed at a percentage of its
market value. L. 1918, c. 483. Since the assessor has primary
responsibility for ascertaining taxable value, it logically follows
that the task of classifying property is an integral part of this
function. Further, the trial court correctly observed that Minn.
St. c. 278, taken as a whole, is essentially an assessment chapter
relating to the assessor’s duties. The task of classification also
involves a factfinding responsibility and is not, as the taxpayer
seems to argue, simply an administrative calculation of the ap-
propriate tax that may be performed by the auditor. Whether
a particular apartment building qualifies for the 25-percent
classification under § 273.18, subd. 20, clearly depends on a wide

2 See, also, Red Owl Stores, Inc. v. Commissioner of Taxation, 264
Minn. 1, 117 N. W. 2d 401 (1962); 18 Dunnell, Dig. (3 ed.) § 9188.

—— ee 363

range of factual judgments concerning compliance with specified
statutory criteria.

Finally, and most significantly, the legislative history concern-
ing the creation of the 25-percent classification unmistakably
supports the conclusion that it was intended to affect taxes pay-
able in 1976. As originally proposed, the effective date provision
was January 1, 1974. The amendment advancing it to January
1, 1975, occurred in committee. Since its purpose was to encour-
age the construction of a specified type of apartment buildings
by a reduction in assessed valuation, the legislature could rea-
sonably have surmised that any such construction stimulated by
the act would probably not be completed prior to January 1, 1975.
A 1974 effective date would undoubtedly have given the bene-
fit of the reduction to existing structures with a resultant loss
of tax revenues.

Thus, we hold that the reclassification of qualifying apartment
structures at 25 percent of their market value under § 273.18,
subd. 20, was explicitly intended to be effective as to the assess-
ment process in 1975 for taxes payable in 1976. Since we find
no ambiguity in the language employed to express this intent by
the legislature, the taxpayer’s arguments directed to that aspect
of the case need not be discussed.

Affirmed.

364 ee

OSCAR REPO yv. CAPITOL ELEVATOR COMPANY,
DIVISION OF INTERNATIONAL MULTIFOODS
CORPORATION, AND ANOTHER.

THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA, INTERVENOR.

OSCAR REPO v. THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA.

252 N. W. 2d 248.

March 18, 1977—Nos. 46386, 46511.

Paul J. Louisell, for relator-appellant.
Van Evera, Mundt, Koskinen, Clure & Andrew and Thomas
F. Andrew, for intervenor-respondent.

a 365

Heard before Rogosheske, Peterson, and MacLaughlin, JJ.,
and considered and decided by the court en banc.

MACLAUGHLIN, JUSTICE.

Oscar Repo, plaintiff-employee, appeals from a district court
judgment in favor of Prudential Insurance Company (Pruden-
tial) in an action to recover disability benefits allegedly due to
Repo under a group sickness and accident policy. Repo also seeks
review by certiorari of an order of the Workers’ Compensa-
tion Board (now Worker’s Compensation Court of Appeals)
awarding Prudential, as intervenor, a portion of Repo’s workers’
compensation settlement with his employer, Capitol Elevator
Company (Capitol). The matters were consolidated for hearing
before this court. For reasons stated herein, we affirm both the
district court and the Workers’ Compensation Board.

On Sunday, September 9, 1973, Repo suffered a heart attack
while at his home. He was hospitalized for more than 3 weeks
and disabled a considerably longer period of time as a result of
the attack. Since Repo worked for Capitol in a grain elevator and
had a prior history of emphysema, the heart attack was arguably
work related.

As an employee of Capitol, Repo was covered under a group
sickness and accident policy issued by Prudential. This policy
provided for payment of medical expenses and benefits for dis-
ability incurred as a result of sickness or accident not covered
by the Workers’ Compensation Act. Workers’ compensation
coverage was provided by Liberty ‘Mutual Insurance Company
(Liberty Mutual).

In December 1978, Repo filed a claim with the Workers’ Com-
pensation Division, alleging that the heart attack was work re-
lated. Capitol and Liberty Mutual denied liability and hearings
were held. On July 31, 1974, before the hearings were complete,
Repo ‘entered, into a settlement agreement with Capitol and
Liberty Mutual. The agreement provided for a lump sum pay-
ment of $12,000 in settlement of ‘all claims Repo had under the
Workers’ Compensation Act. Although Repo had requested medi-

366 Eee

cal and disability benefits in his petition, the settlement agree-
ment purported to pay $12,000 in disability only.

While the workers’ compensation claim was pending, Repo also
sought benefits under the sickness and accident policy with
Prudential. On August 8, 4 days after the settlement with Capitol
and Liberty Mutual, Repo signed an agreement with Prudential
whereby Prudential agreed to pay Repo’s medical expenses
(totaling $2,626.84) but with a provision that Prudential would
be reimbursed—

«« * * $f at any later date medical and hospital expenses are
paid under any Workmen’s Compensation Law or Act for this
disability, or any settlement of claim for such medical and hospi-
tal expenses is made or any payment is made to avoid a claim for

such medical and hospital expenses or a settlement of such claim
RIT

Prudential was not informed of the settlement with Capitol and
Liberty Mutual when it signed this agreement.+

Repo’s settlement with Capitol and Liberty Mutual was sub-
mitted to the Workers’ (Compensation Division on August 19,
1974, but failed to set forth the expenses for medical treat-
ment and care. Since Repo’s claim petition had alleged certain
medical expenses, the division made inquiry of Repo’s attorney
and learned that Prudential had made certain payments. The di-
vision then notified Prudential of the proposed settlement and
it petitioned for intervention, claiming that it was entitled to
reimbursement. The commission allowed Prudential to intervene,
upheld the settlement with Capitol and Liberty Mutual, and
placed $2,626.84 of the settlement in escrow pending ‘a determi-
nation of Prudential’s claim. The compensation judge held a
hearing on January 6, 1975, on the merits of Prudential’s claim

1The agreement signed by Repo and his attorney also contained the
following statement: “I filed a claim with Workman’s Compensation;
however, no decision has been made by them as yet.” This in spite of
the fact that 4 days earlier Repo had settled his workers’ compensation
claim with Capitol and Liberty Mutual.

ee 367

and entered a decision favorable to Repo. The board reversed
this decision on October 10, 1975, and ordered the sum held in
escrow to be paid to Prudential.

While Prudential’s intervention claim was pending before the
board, Repo brought an action against Prudential in the district
court to recover disability benefits totaling $1,950. The district
court dismissed the action on September 19, 1975.

Prudential argues that when an insurer pays benefits under
a policy which excludes injury or sickness covered by the Work-
ers’ Compensation Act, and the employee, without the insurer’s
consent, makes a settlement with the workers’ compensation
carrier arising out of the same sickness for which benefits were
paid, the insurer should be reimbursed. It is clear that if Repo
had litigated his claim and the commission ultimately found in
his favor, Prudential would be entitled to reimbursement from
the proceeds of the award. Lemmer v. Batzli Electric Co. 267
Minn. 8, 125 N. W. 2d 484 (1968); Equitable Life Assurance
Society v. Bachrach, 265 Minn. 83, 120 N. W. 2d 827 (1963).
Repo asserts that these cases do not apply where the employee
settles his claim, citing Tatro v. Hartmann’s Store, 295 Minn.
282, 204 N. W. 2d 125 (1973). In Tatro, the employee had settled
his workers’ compensation claim for the amount by which his
medical expenses exceeded the payments received from his pri-
vate health insurer. The private health insurer had not been noti-
fied of the workers’ compensation proceeding and sought to
intervene after the settlement had been approved. We held that
under the circumstances there present it would be inequitable
to the employee to allow reimbursement since the settlement was
obviously based on an assumption that the private health insurer
would not seek reimbursement. Of particular significance is the
following language:

“We believe, however, that procedures should be instituted
by the commission to prevent the recurrence of the circum-
stances presented in this appeal. The payments made on em-
ployee’s behalf by relators were specifically referred to in em-

368 ee

ployee’s claim petition. Therefore, all of the parties and the com-
mission were aware that relators might have some interest in
the proceeding. Whatever statutory rights relators may have had
were nevertheless ignored in the settlement and also ignored by
the commission’s approval of the settlement. One of the basic
principles of workmen’s compensation legislation is ‘measurably
to place upon industry the burden of the economic loss resulting
from the deaths and injuries of workmen engaged in industry.’
* * * Tf private insurers pay medical bills for work-related in-
juries, the burden is shifted from industry to the subscribers of
private health programs.” 295 Minn. 286, 204 N. W. 2d 128.

The obvious import of this language is that normally a sickness
and accident insurer who pays benefits under a policy which ex-
cludes injuries covered by workers’ compensation iis entitled to
reimbursement from the proceeds of a settlement. This is consis-
tent with our earlier decision in Lemmer v. Batzli Electric Co.
supra. If we were to embrace the distinction Repo suggests, an
employee in his position would always strive to settle his work-
ers’ compensation claim, thus depriving the sickness and accident
insurer of reimbursement and rendering our decision in Lemmer
a nullity. Because Prudential can’t bring a workers’ compensa-
tion claim in its own name, the only way to protect its rights is
to allow intervention and reimbursement from the proceeds of
the settlement.

Following our dicta in Tatro, the Workers’ Compensation Divi-
sion established procedures which resulted in the notification
to Prudential in this case of the proposed settlement, and to Pru-
dential’s intervention. Unlike the situation in Tatro, there can
be no claim by Repo that he was unaware of Prudential’s position
in this matter. If anything, the opposite is true. Whether inten-
tional or not it appears the settlement of the workers’ compensa-
tion claim was concealed from Prudential at the time of the pay-
ments to Repo from Prudential. It was only because the commis-
sion would not approve the settlement unless all ‘interested
parties were notified, as required by Tatro, that Prudential

a 369

learned of the same. We therefore find none of the potential in-
equity in granting reimbursement that was present in Tatro.

We believe that in any case of doubtful liability the sickness
and accident insurer should immediately pay benefits on the as-
sumption that the sickness or injury is covered by its policy, and
later seek reimbursement if there is a successful workers’ com-
pensation proceeding. Our holding in this and earlier cases fully
protects its right to do so. As a practical matter this will gen-
erally mean that the sickness and accident insurer will have to
be included in any settlement negotiations. This seems fair since
its rights are at stake just as are the employee’s. The employee
can, of course, choose to settle without the sickness and accident
insurer’s consent, but the insurer will then be entitled to full
reimbursement from the ‘proceeds of the settlement.

When Repo received payment for the medical expenses from
Prudential, he signed a contract-agreeing to reimburse Pruden-
tial if any settlement of a claim for medical and hospital ex-
penses under the Workers’ Compensation Act was made. Repo
argues that since the workers’ compensation settlement was for
disability only, it was not within the scope of the agreement with
Prudential. We do not follow the logic of this argument at all.
In his claim petition Repo asked for medical and hospital ex-
penses. By the settlement, he released his claim for such ex-
penses. That is clearly a settlement of the claim for hospital and
medical expenses, regardless of the label attached to it. It is
equally clear that the agreement with Prudential was not void
for lack of consideration. Since a bona fide dispute existed re-
garding coverage, Prudential’s agresment to pay benefits consti-
tuted consideration. Therefore, while Prudential is entitled to
reimbursement even without an agreement under our Tatro deci-
sion, it is also entitled to reimbursement by virtue of its agree-
ment with Repo.

What has been said about reimbursement of the medical ex-
penses also dictates that Repo’s claim for disability benefits

370 a

under the policy with Prudential was properly denied by the dis-
trict court. Both decisions must therefore be affirmed.
Affirmed.

GENERAL INSURANCE COMPANY OF AMERICA v.
MICHAEL A. LEBOWSKY AND ANOTHER.

252 N. W. 2d 252,

March 18, 1977—No. 46464.

EE

Berman & Lazarus, Barry Lazarus, and Richard A. Saliter-
man, for appellants.

Jardine, Logan & O’Brien and John M. Kennedy, Jr., for re-
spondent.

Heard before Yetka, Scott, and Winton, JJ., and considered
and decided by the court en banc.

YETKA, JUSTICE.

_ Plaintiff, a surety, brought an action to recover damages sus-
tained after it became obligated to pay an indemnity bond for
Jost. securities. A partial summary judgment was granted in
favor of plaintiff on the issue of liability in district court. There-
after, the issue of damages was tried by the court, which found
plaintiff entitled to $12,199.57. At the conclusion of the trial on
damages, the trial court made amended findings of fact and con-
clusions of law, finding defendants guilty of fraud on the
issue of liability. We affirm.

The issues raised on this appeal are:

(1) Whether, after partial summary judgment is entered
under Rule 56.04, Rules of Civil Procedure, on the issue of liabil-
ity and a separate trial had on the issue of damages alone, the
trial court can enter findings and conclusions holding that lia-
bility is based on fraud.

(2) Whether a plaintiff surety is entitled to summary judg-
ment on the issue of fraud when defendant principal admits
under Rule 36, Rules of Civil Procedure, that he falsified an ap-
plication for a bond to cover a lost instrument, that he later
pledged the instrument to a ‘third party, and that as a result
plaintiff surety was obligated to make payment under the terms
of the bond.

372 Es

On February, 18, 1971, defendants, Michael A. Lebowsky and
Lynn D. Lebowsky, applied to plaintiff, General Insurance Com-
pany of America, for a lost instrument bond. In their applica-
tion defendants affirmed the following statement was true:

“The certificate in question was mailed, via regular first class,
to Merrill Lynch at 210 Cargill Bldg. Mpls on 1-18-71. They re-
ceived the envelope with the flap open and the certificate missing.
I call [sic] the Post Office, Lost Mail Dept. and left word if the
certificate was found anywhere in the mails. To this date it has”
not been. recovered.”

They also certified:

“That if this suretyship is given in connection with lost instru-
ments of securities, and such lost instruments come into my pos-
session at any time, I will, at my own cost and expense deliver
or cause said securities to be delivered to SURETY.”

Plaintiff then issued the bond in the principal amount of $20,000.
On the basis of the bond, Eastern Airlines issued a replacement
debenture to one of the defendants who in turn assigned the re-
placement debenture to Midway National Bank of St. Paul.

On September 27, 1972, one of the defendants pledged the
original debenture certificate to Crystal State Bank as collateral
for a $30,000 promissory note. On August 2, 1973, Crystal State
Bank presented the original certificate and demanded it be re-
registered in its name. Under the terms of its bond agreement,
plaintiff was obligated to pay for a replacement debenture.

On October 30, 1978, plaintiff instituted the present action.
The complaint alleged two counts, the first on the basis that the
security “was in fact not lost as fraudulently, unlawfully and/or
negligently represented by defendants,” and the second on the
basis of breach of contract.

On November 1, 1974, plaintiff moved for summary judgment.
On November 27, 1974, a partial summary judgment was ordered
in favor of plaintiff on the issue of liability. No specific find-
ings of fact or conclusions of law were made.

oe

a 373

Prior to trial, defendants answered each of the following re-
quests for admissions in the affirmative:
“TI
“That on or about February 18, 1971, Michael A. Lebowsky
and Lynn D. Lebowsky made application with the General In-
surance Company of ‘America for issuance of a lost instrument
bond naming Michael A. Lebowsky as principal, Eastern Air-
lines, Chemical Bank and the First National Bank of Chicago
as obligees and the General Insurance Company of America as
surety, certifying and affirming that debenture RU2375, dated
January 4, 1971, in principal amount of $20,000.00 with maturity
date of October 1, 1993, issued by Eastern Airlines, Inc. had been
lost.
Cr
“ey
“That on or about February 18, 1971, General Insurance Com-
pany of America did issue lost security bond No. 587820.
sok kk oF
“1X
“That security RU2375 was in fact not lost as claimed by
Michael A. Lebowsky and Lynn D. Lebowsky in their application
for lost instrument bond.
“x
“That on or about September 27, 1972, Michael A. Lebowsky
pledged security RU2375 to the Crystal State Bank in Minnesota
as collateral for a $30,000.00 loan which he secured at that time.
ee OR Re
“XIV
“That General Insurance Company of America was obligated
under the terms of bond No. 5878 to make payment and did make
payment to the First National Bank of Chicago in the amount
of $10,145.83.”
On May 28, 1975, the issue of damages was tried separately,
and then the court issued findings of fact and conclusions of law.
One finding was:

374. Es

, “That the plaintiff was required to make said payment as the
direct result of the fraudulent, unlawful and/or negligent con-
duct of defendants, and each of them.”

Thereafter, defendants moved. that this finding be stricken, or,
in the alternative, a new trial be granted. On the day their mo-
tion was heard, plaintiff made a motion before the same judge
who had originally decided the question of liability and who had.
ordered partial summary judgment asi to liability requesting
more specific findings pursuant to Rule 56.041 to read in part,
the defendants were “guilty of fraud as alleged in the pleadings
and as admitted by defendants in their Response to Request for
Admissions.” Based on the admissions of defendants, the court
made findings on August 27, 1975, to provide that defendants
were “guilty of fraudulent conduct.” On the basis of these find-
ings, the judge who tried the damages issue amended his findings
of fact and conclusions of law on September 9, 1975, to incor-
porate findings of fraud on the part of defendants. Judgment
was entered thereon and defendants appealed from the judg-
ment.

Hi We start with the common ground. Defendants do not dis-
pute liability in some form, nor do they dispute the amount of
damages found. However, they do allege the partial summary
judgment on liability found only general liability on the part of
defendants. The finding, defendants. argue, could be based on

1 Rule 56.04, Rules of Civil Procedure, provides: “If, on motion under
this rule, judgment is not rendered upon the whole case or for all the
relief asked and a trial is necessary, the court at the hearing of the mo-
tion, by examining the pleadings and the evidence before it and by in-
terrogating counsel, shall, if practicable, ascertain what material facts
exist without substantial controversy and what material facts are ac-
tually and in good faith controverted. It shall thereupon make an or-
der specifying the facts that appear without substantial controversy,
including the extent to which the amount of damages or other relief
is not in controversy, and directing such further proceedings in the ac-
tion as are just. Upon the trial of the action the facts so specified shall
be deemed established, and the trial shall be conducted accordingly.”

eee

Ee 375

breach of contract, fraud, or negligence, and is thus equivalent
to a general verdict. Defendants thus object to the amended find-
ing of the trial court that judgment was based on fraud.

Procedural deficiencies rather than substantive law create the
problem at issue. Under Rule 56.04, Rules of Civil Procedure,
the trial court which decided the issue of liability was under a
duty to issue an order specifying what facts appeared to it to be
without substantial controversy, preferably supported by find-
ings of fact. The procedure prescribed in Rule 56.04 is designed
to be ancillary to a motion for summary judgment. Rule 56.04
does not authorize the entry of a judgment on part of a claim or
the granting of partial relief. It simply allows the court to with-
draw sham issues from the case and in so doing to salvage some
results from the judicial efforts involved in the denial of a mo-
tion for summary judgment. Rule 56.08 does state that “[a] sum-
mary judgment, interlocutory in character, may be rendered on
the issue of liability alone although there is a genuine issue as
to the amount of damages.” However, Rule 54.01 defines judg-
ment to include “a decree and means the final determination of
the rights of the parties in an action or proceeding.” Thus, as
defined in Rule 54.01, a judgment does not include a partial sum-
mary “judgment” as authorized by Rules 56.03 and 56.04. 2 Het-
land & Adamson, Minnesota Practice, Civil Rules Ann., p. 521.
The term “partial summary judgment” thus is often a misnomer.
If a court renders a summary adjudication that is less than final,
it is more accurate to refer to that action as an interlocutory
adjudication.

Thus, the original order here purporting to enter summary
judgment on the issue of liability alone is a nullity in so far as
it attempts to enter judgment. It will be treated as a finding of
no dispute on the issue of liability, yet it did not set forth the
basis of that liability. Therefore, the court which tried the dam-
ages issue correctly allowed plaintiff to petition the court which
heard the liability issue to clarify and amend its findings before

376 |

it issued final findings of fact, conclusions of law, and order for
judgment.

HI On the question whether the facts were sufficient to sub-
stantiate a finding of fraud, we hold in the affirmative. A negligent
misrepresentation is sufficient for a finding of fraud in Minnesota.
8A Dunnell, Dig. (3 ed.) § 3819. The admissions established at
least a negligent misrepresentation on the part of defendants.
As such, the admissions are sufficient to establish fraudulent
conduct on the part of defendants as a matter of law.

Affirmed.

KURT M. LEPPING v. HAMMERS
CONSTRUCTION COMPANY AND ANOTHER.
C

252 N. W. 2d 580.
March 18, 1977—No. 46105.

Reding & Votel, for relators.
Sween & Salazar and Mark E. Fuller, for respondent.

PER CURIAM. :

Relators seek review of a unanimous decision of the Workers’
Compensation Board, (now the Worker’s Compensation. Court
of Appeals) reversing the compensation judge’s finding as to
causation and awarding the employee benefits for temporary

SY

total disability and medical expenses. The issue raised on appeal
is whether there is substantial evidence to support the finding
that the employee’s disabling condition, optic neuritis, was
causally related to his employment.

A review of the record reveals that the board had before it
eredible evidence that the employee’s disability was causally re-
lated to his employment. Findings of the board upon questions
of fact will not be disturbed unless they are manifestly contrary
to the evidence. Grgurich v. Sears, Roebuck & Co. 301 Minn. 291,
223 N. W. 2d 120 (1974).

Respondent is allowed. $350 attorneys fees.

Affirmed.

Ot1s, JUSTICE (dissenting).

Two commissioners of the Workers’ Compensation Board (now
the Worker’s Compensation Court of Appeals) have reversed
the determination of the compensation judge with the observa-
tion that “[w]e have no reason to doubt the claimant’s veracity.”
I respectfully submit that on this record there was no substantial
basis for reversing the findings of the judge who heard and saw
the witnesses and was in a better position to assess the veracity
of the claimant than was the board. This is a case where, in my
opinion, the evidence as a matter of law compelled the conclu-
sions reached by the compensation judge.

The employee, Kurt Lepping, testified that on January 7, 1974,
the scaffold on which he was working for the employer was
bumped by a backhoe which caused him to fall head first into
the bucket, injuring his left eyebrow. He made no complaint of
any injury to his eye to either his employer or his co-employees,
none of the whom observed any such injury. He continued to
work until January 11, when he claims to have been laid off, al-
though the employer asserted he simply did not show up for
work.

The employee was originally treated by his own doctor, Dr.
Mark LeRud, who had 8 days prior to the injury treated the em-

fT

378 ee

ployee for a strep throat and congested sinuses. On January 21,
Dr. LeRud examined the employee because of his complaint that
he had pain in his left eye. Dr. LeRud was of the opinion that
this symptom was consistent with his other problems including
an emerging jwisdom. tooth. The doctor saw no cuts or bruises
in the area of the employee’s left eye and diagnosed his condition
as optic neuritis. The employee was referred to an opthalmolo-
gist, Dr. Patrick Colliton, and to a neurologist, Dr. Ryan Har-
rington. The employee did not advise Dr. Colliton that he had
had a blow to his head and the doctor found no condition con-
sistent with trauma. Dr. Harrington testified that the cause of
the neuritis was unknown and he, too, found no condition which,
in his judgment, was caused by trauma. A fourth doctor, Dr.
Ernest Larson, Jr., examined the employee on January 28, and
based his diagnosis on the assumption that the employee had
struck his head on the tractor bucket. He acknowledged that, in
most cases, there is no known cause for optic neuritis and agreed
that a cold, sore throat, and infection were possible causes of op-
tic neuritis, However, he was of the opinion that employee “prob-
ably sustained. this very fine fracture of some of the bones in his
head that would connect his nose or sinuses with the passageway
that the optic nerve would pass through.” This testimony was
discounted by the compensation judge for the reason that there
‘was no evidence the employee had sustained such a fracture and
x-rays revealed no fractures. He reached the following conclu-
sions:
“ “J conclude upon this record that trauma has not been rea-
sonably established, either factually or by medical testimony,
as the probable cause of employee’s optic neuritis of his left eye.
In so doing, I accept the medical opinions of Dr. LeRud, Dr. Colli-
ton and Dr. Harrington.”
x £ # eK

«« * * The evidence does not reasonably establish that em-

ployee did, in fact, fall on January 7, 1974, and strike his left eye-

Ee 379

brow on the rim of the backhoe bucket. The testimony of several
eyewitnesses to this claimed occurrence contradicts employee’s
testimony and results in a substantial doubt in my mind as to
exactly what did happen to employee when the scaffolding was
jarred.”

i

“Tf employee did sustain a significant blow to his left eyebrow
when he fell sufficient to cause immediate pain, soreness and red-
ness in the area of his left eye as he alleges, it seems to me that
he would have mentioned the incident to someone at the time.
He did not.”

Where the testimony of the employee is totally unsupported,
as in this case, and all of the evidence including those of dis-
interested co-employees contradicts and impeaches the em-
ployee’s version, and the employee’s own doctor, in addition to
the other doctors, finds no evidence of trauma, it is, in my opin-
ion, an abdication of the fact-finding function of the board to
reject out of hand all of the evidence which militates against the
employee’s position.

I would sustain the findings of the compensation judge.

CRAIG CAMPBELL, M. D. v. ST. MARY’S
HOSPITAL AND OTHERS.

252.N. W. 2d 581.

March 25, 1977—No. 46742.

Holmes, Eustis, Kircher & Graven and Warren P. Eustis, for
appellant.

Johnson, Fredin, Killen, Thibodeau & Seiler, John J. Killen,
and Steven C. Fecker, for respondents St. Mary’s Hospital and
its personnel.

Halverson, Watters, Bye & Downs, Gene W. Halverson,
Michael Q. Lynch, and C. M. Fredin, for respondents Duluth
Surgical Board of Recommendations and its members.

Donovan, McCarthy, Crassweller, Larson, Barnes & Magie
and Charles T. Barnes, for respondent The Duluth Clinic, Ltd.

ROGOSHESKE, JUSTICE.

Following termination of his medical staff privileges as a sur-
geon by defendant St. Mary’s Hospital in October 1975, plaintiff,
Dr. Craig Campbell, brought this action seeking injunctive, de-
claratory, and monetary relief arising from allegations of denial

es 381

of due process, breach of contract, interference with business
relationships, defamation, and conspiracy.1 Upon motions for
summary judgment made both by defendants and /plaintiff, the
trial court ruled in favor of defendants, finding that plaintiff’s
surgical privileges were terminated with proper regard to his
due process rights under both the Federal and state constitu-
tions. While we find no showing of state action on the part of
any named defendant to raise plaintiff’s due process claims to
a constitutional dimension, we nevertheless hold that plaintiff
was afforded fundamental fairness as to all of what may be
termed his contractual due process rights under the bylaws,
rules, and regulations governing medical staff privileges granted
by St. Mary’s Hospital. Finding no genuine issue as to any ma-
terial fact to support plaintiff’s other alleged claims, we affirm
the trial court’s award of summary judgment to defendants.

For approximately 8 years prior to this action, plaintiff prac-
ticed surgery in Duluth as a board-certified surgeon licensed to
practice in Minnesota. During the early part of 1975, plaintiff
was an employee of the Duluth Clinic and was also an active
member of the surgical staff at St. Mary’s Hospital. As a condi-
tion precedent to his hospital appointment, plaintiff agreed ‘to
abide by the bylaws, rules, and regulations governing the medical
staff of the hospital, pertinent parts of which are printed in the
appendix. The Duluth Surgical Board of Recommendations is
a local review organization comprised solely of surgeons that has
since 1935 served St. Mary’s and the two other Duluth hospitals
in an advisory capacity with regard to the granting ‘of surgical
privileges.

1 Apart from the claims made against St. Mary’s Hospital, the Duluth
Surgical Board of Recommendations, which had recommended revoca-
tion of plaintiff’s privileges, was sued for denial of due process, inter-
ference with business relationships, defamation, and conspiracy. Plain-
tiff also alleged that his former employer, Duluth Clinic, Ltd., had en-
gaged in a conspiracy with these defendants. All other defendants ap-
pear to be either officers, employees, or members of the above specified
defendants.

382 ee

In April 1975, a surgeon on the staff of the Duluth Clinic asked
to meet ‘with the Duluth Surgical Board of Recommendations
to discuss problems which had arisen in connection with plain-
tiff’s surgical practice. After a meeting with this surgeon, the
board advised all Duluth hospitals that plaintiff should be al-
lowed to ‘perform major surgery only under the observation of
another surgeon as sponsor. This recommendation by the board
prompted the administrator of St. Mary’s to notify plaintiff on
April 25 that he would be required to have sponsors for all major
surgery. Although plaintiff was entitled under the board’s opera-
tional principles to appeal the sponsorship recommendation, he
elected not to do so.

This sponsorship program continued until July 14, 1975, when
the Duluth Clinic, which had previously provided sponsors for
plaintiff, terminated his employment.? Alerted by these develop-
ments, the administrator of St. Mary’s requested the chief of
staff on July 22 to implement Art. IV of the hospital’s bylaws
providing for an investigation into the performance of a member
of the medical staff. On July 25, a special investigating commit-
tee was appointed pursuant to Art. IV, § 1(b), and on that same
date plaintiff was notified that his surgical practice was under
investigation which could ultimately result in a reduction or sus-
pension of his staff privileges. The committee then reviewed each
chart of every patient treated by plaintiff at St. Mary’s, and was
able to document 231 separate medical deficiencies in 86 patient
histories. On August 6, plaintiff was given an opportunity to
meet with the committee and, assisted by counsel, to respond to
the criticized cases. The following day, the committee made a re-
port to the executive committee of the medical staff, as required
by the bylaws, and unanimously recommended that plaintiff’s
surgical privileges be terminated.

2In a companion case, plaintiff moved to compel arbitration of his
dismissal from the Duluth Clinic. This motion was denied by the trial
court and his appeal to this court was dismissed on June 7, 1976, for fail-
ure to prosecute. See Supreme Court File No. 46668.

| 383

Plaintiff was thereafter promptly advised by letter that the
investigating committee’s recommendation had been adverse, and
that under Art. V of the bylaws he was entitled upon request to
a formal hearing before a special ad hoc committee of the execu-
tive committee. After a timely request was made by plaintiff’s
attorney, a hearing was scheduled for August 21. Prior to the
hearing, which was continued to September 3 at plaintiff’s re-
quest, he was given a copy of the written findings of the investi-
gating committee and was also afforded the opportunity of re-
viewing the 86 criticized cases. He was not, however, given access
to the reports made by his sponsors because these reports covered
operations performed not only at St. Mary’s but also at the other
two hospitals in Duluth.*

While these proceedings were in progress at the hospital, the
Duluth Surgical Board of Recommendations met to reconsider
plaintiff’s status. Following a recommendation by this board on
August 15 that plaintiff’s surgical privileges be totally revoked,
the administrator of St. Mary’s exercised her authority under
Art. IV, § 2, of the bylaws and summarily suspended plaintiff's
privileges. Plaintiff again chose not to appeal the adverse recom-
mendation of the Duluth Surgical Board of Recommendations
as he was entitled to do under that body’s operational principles.
He did appeal his summary suspension by the administrator,
which was consolidated with the hearing before the ad hoc com-
mittee.

On September 3, the continued ad hoc committee hearing was
reconvened, and plaintiff was given a full opportunity, aided by
an attorney, to present his case. After thorough consideration
of the evidence, including expert testimony from Dr. William
Holden, who testified on behalf of plaintiff, the ad hoc committee
recommended to the chief of staff that plaintiff not have major

3 The Duluth Surgical Board of Recommendations later offered plain-
tiff the opportunity to read the sponsor reports under the stipulation
that he and his counsel only be allowed to take notes, Plaintiff rejected
this stipulation.

384

surgical privileges at St. Mary’s. This proposed restriction was
then reviewed by the full executive committee, as provided by
Art. V, § 2(c), and on September 12, this body submitted its
recommendation to the board of trustees of St. Mary’s Hospital
that all of plaintiff's surgical privileges be rescinded.

In strict compliance with Art. V, § 8, of the bylaws, plaintiff
was advised in writing of the executive committee’s adverse
recommendation and of his right to request a formal review hear-
ing before the medical staff committee of the board of trustees.
Plaintiff requested and was given such a hearing on October 6,
following which the medical staff committee recommended to
the board of trustees that plaintiff’s surgical staff privileges at
St. Mary’s be terminated. This recommendation was endorsed
by the board of trustees at its regular meeting on October 21,
and plaintiff’s final termination became effective October 23.

In considering the cross-motions for summary judgment made
by both plaintiff and defendants, the trial court operated from
the premise that “[t]he gravamen of plaintiff’s case concerns
his allegation that he was denied due process of law in the re-
scission of his surgical privileges.” If plaintiff was afforded due
process, the court reasoned, his remaining claims for breach of
contract, interference with business relationships, defamation,
and conspiracy would necessarily become moot. The court went
on to presume, without elaboration, that state action existed to
bring the due process requirements of both the Federal and state
constitutions into play and ultimately concluded that defendants
were entitled to summary judgment since plaintiff had been af-
forded due process throughout the proceedings to revoke his
surgical privileges.

The threshold question which we must resolve on this appeal
is whether the trial court correctly found the existence of state
action on the part of defendants, particularly St. Mary’s Hospi-
tal. It is of course elementary that the due process provisions of
the Fourteenth Amendment and Minn. Const. art. 1, § 7, apply
only if the actions to terminate plaintiff’s surgical privileges
were done under color of state law. As most recently explained

— 385

by the United States Supreme Court in Jackson v. Metropolitan
Edison Co. 419 U. S. 345, 349, 95 S. Ct. 449, 453, 42 L. ed. 2d 477,
483 (1974):

“The Due Process Clause of the Fourteenth Amendment pro-
vides: ‘[N]or shall any State deprive any person of life, liberty,
or property, without due process of law.’ In 1883, this Court in
the Civil Rights Cases, 109 U. S. 8, affirmed the essential
dichotomy set forth in that Amendment between deprivation by
the State, subject to scrutiny under its provisions, and private
conduct, ‘however discriminatory or wrongful,’ against which
the Fourteenth Amendment offers no shield. Shelley v. Kraem-
er, 334 U. S. 1 (1948).”

Accord, Nietzel v. Farmers & Merchants State Bank, 307 Minn.
147, 238 N. W. 2d 437 (1976).

While there is no doubt that the operation of a public hospital
would constitute state action, the issue becomes considerably
more complex when considering the activities of hospitals which,
like St. Mary’s, are wholly private. Courts from other jurisdic-
tions that have dealt with this question have generally looked
to the degree of entanglement that exists between a hospital’s
public and private functions. One line of cases, best exemplified
by Simkins v. Moses H. Cone Memorial Hospital, 323 F. 2d 959
(4 Cir. 19638), certiorari denied, 376 U. S. 938, 84 S. Ct. 798, 11
L. ed. 2d 659 (1964), has held that when a private hospital re-
ceives Federal funds, such as are provided for construction under
the Hill-Burton Act,‘ there is sufficient state action to require
the hospital to conduct its activities in compliance with the Four-
teenth Amendment. See, also, Sams v. Ohio Valley General Hos-
pital Assn. 418 F. 2d 826 (4 Cir. 1969). In another line of au-
thority, the courts have been far more reticent to predicate the
existence of state action solely on the receipt of Federal or state
funds. In Ward v. St. Anthony Hospital, 476 F. 2d 671 (10 Cir.

4 The Hill-Burton Act provides Federal funds for construction to gov-
ernmentally owned and voluntary nonprofit private hospitals. See, 42
USCA, § 291 et'sea.

386 Ee

1978), a case virtually identical to the present appeal, the plain-
tiff brought suit against a private hospital claiming a denial of
due process following the suspension of his medical staff privi-
leges. Despite the fact that the hospital was receiving funds
under Hill-Burton, Medicare, Medicaid, and state programs, the
court refused to find state action, holding instead that before
Federal jurisdiction could be invoked there had to be a showing
that the state was directly involved in the actions taken to dis-
charge the plaintiff. See, also, Greco v. Orange Memorial Hospi-
tal Corp. 518 F. 2d 873 (5 Cir.), certiorari denied, 423 U.S. 1000,
96 S. Ct. 483, 46 L. ed. 2d 376 (1975); Mulvihill v. Julia L.
Butterfield Memorial Hospital, 329 F. Supp. 1020 (S. D. N. Y.
1971).

With these principles in mind, we have little difficulty in con-
cluding on this record that no state action whatsoever existed
with respect to the activities of the Duluth Surgical Board of
Recommendations. The board’s sole function is to serve Duluth
area hospitals in an advisory capacity, and it has no power to im-
plement its recommendations. Neither is this board regulated
or funded by either the state or Federal government, and the de-
termination of fitness to practice surgery is not in any sense a
governmental responsibility.

Less clear is the status of St. Mary’s Hospital. Unlike any of
the preceding cases which decided the question of state action
after a thorough factual analysis, we are hampered by a record
totally devoid of any facts which would tend to show the degree
of entanglement, if any, between the hospital and either the state
or Federal government.® Since it would be mere conjecture for
us to presuppose that such an entanglement existed, we review
the revocation of plaintiff’s privileges apart from any constitu-
tional considerations. This restriction on judicial review in the

5 It is unnecessary for us to decide the state action implications of L.
1976, c. 325, which was enacted after plaintiff instituted the present
case. This statute generally requires each hospital to file an annual re-
port on the operation of its complaint or grievance mechanism with the
office of health complaints in the Department of Health.

— 387

present case, however, has no effect on the outcome, for under
the terms of both the operational principles of the Duluth Surgi-
cal Board and the medical staff bylaws of St. Mary’s Hospital,
plaintiff was in our opinion afforded all of the due process rights
he could otherwise have claimed under either the Fourteenth
Amendment or Minn. Const. art. 1, § 7.6

There is little need to consider in detail plaintiff’s allegation
of unfair treatment by the Duluth Surgical Board of Recommen-
dations. After the board recommended that plaintiff’s surgical
privileges be totally rescinded by Duluth area hospitals, plaintiff
elected not to appeal this adverse decision, as he was entitled to
do under the board’s operational principles. Having failed to ex-
haust his procedural remedies, he cannot now complain that his
treatment was unjust. See, Suckle v. Madison General Hospital,
499 F. 2d 1864 (7 Cir. 1974).

Nor has plaintiff made a meaningful argument that St. Mary’s
Hospital breached its contract by failing to consider his case in
a manner commensurate with its bylaws, to which he agreed to
be bound when he was appointed to the medical staff and thereby
granted surgical privileges. Acting upon the recommendation
of the Duluth Surgical Board of Recommendations, the adminis-
trator first exercised her authority under Art. IV, § 2, and re-
stricted plaintiff’s privileges to practicing surgery only in the
presence of a sponsor. It was only after this sponsorship arrange-
ment failed that a special investigating committee was appointed
under Art. IV, § 1, to review plaintiff’s surgical practice in de-
tail. The fact that some members of the investigating committee
were also members of the Duluth Surgical Board of Recom-

®In those cases which have held that a doctor is entitled to due
process of law under the Fourteenth Amendment, courts have not re-
quired hospitals to conduct a full-blown judicial trial prior to revoca-
tion of staff privileges. Rather, courts have looked to whether the doc-
_ tor received reasonable notice of the charges against him and if he had
an. opportunity to be heard before a panel of fairminded doctors. See,
Klinge v. Lutheran Charities Assn. of St. Louis, 523 F. 2d 56 (8 Cir.
1975); Woodbury v. McKinnon, 447 F. 2d 839 (5 Cir. 1971).

po

388

mendations was not a violation of the medical staff bylaws and
did not necessarily deny plaintiff a fair consideration of.the evi-
dence. Cf. Withrow v. Larkin, 421 U. S. 35, 95 S. Ct. 1456, 43 L.
ed. 2d 712 (1975). When this investigation revealed numerous
surgical deficiencies, plaintiff was properly notified that he had
a right to a hearing before a special ad hoc committee appointed
by the executive committee of the medical staff pursuant to Art.
V, § 1. Plaintiff requested such a hearing and was given the op-
portunity to review both the written findings of the investigat-
ing committee and the specific case histories that had been criti-
cized in advance. Thereafter, plaintiff appeared at the hearing
fully represented by counsel and was permitted to introduce testi-
mony from his own expert witness. ‘The bylaws did not require
the hospital to accommodate plaintiff's repeated requests for a re-
view of his case by a panel of doctors completely independent
of St. Mary’s. See, also, Duffield v. Charleston Area Medical
Center, Inc. 503 F. 2d 512 (4 Cir. 1974). Finally, under Art. V,
§ 8, plaintiff was permitted to appeal the adverse recommenda-
tion of the executive committee to the medical staff committee
of the board of trustees and was given the opportunity of pre-
senting his case with the assistance of counsel. We therefore hold
that under the bylaws plaintiff was afforded a full measure of
his contractual due process rights at every stage of the proceed-
ings to revoke his surgical privileges at St. Mary’s Hospital and
that the trial judge was fully justified in awarding this defend-
ant summary judgment.

As must be conceded by all parties, plaintiff’s remaining
causes of action asserted against the individual members of the
review boards at St. Mary’s Hospital and the Duluth Surgical
Board of Recommendations for interference with business rela-
tionships, defamation, and conspiracy cannot stand in the ab-
sence of legal malice. This is so because of the legislatively
granted immunity to members or employees of medical review
organizations provided by Minn. St. 145.63, which provides in
part:

ee 389

“No person who is a member or employee of, who acts in an

advisory capacity to or who furnishes counsel or services to, a
review organization shall be liable for damages or other relief
in any action brought by a person or persons whose activities
have been or are being scrutinized or reviewed by a review
organization, by reason of the performance by him of any duty,
function or activity of such review organization, wnless the
performance of such duty, function or activity was motivated
by malice toward the person affected thereby.” (Italics sup-
plied.)
The clear import of this statute is to encourage the medical pro-
fession to police its own activities with a minimum of judicial
interference. And the wisdom of this legislative policy is obvious.
Our ignorance of such multisyllabic terms found in the present
record as “parathyroidectomy” and “aneurysmectomy” is no less
than that shared by the general public. Simply stated, courts are
ill-equipped to pass judgment on the specialized expertise re-
quired of a physician, particularly when such a decision is likely
to have a direct impact on human life.

To preserve his right to trial, an adverse party to a motion for
summary judgment “may not rest upon the mere averments or
denials of his pleading but must present specific facts showing
that there is a genuine issue for trial.” Rule 56.05, Rules of Civil
Procedure; Fownes v. Hubbard Broadcasting, Inc. 302 Minn.
A471, 225 N. W. 2d 584 (1975) ; Rosvall v. Provost, 279 Minn. 119,
155 N. W. 2d 900 (1968). We are unconvinced from a review of
plaintiff's affidavits and the evidence most favorable to his
claims that his broad allegations of malice are anything more
than unsubstantiated speculation as to the reasons for the revoca-
tion of his surgical privileges. The immunity provisions of Minn.
St. 145.63 were therefore fully applicable with respect to the pro-
ceedings held by both the review boards at St. Mary’s Hospital
and the Duluth Surgical Board of Recommendations, and the
trial court properly awarded these defendants summary judg-
ment. Finally, since there is nothing in the record to suggest that

390 es

plaintiff’s termination by the Duluth Clinic was either unlawful
or accomplished by unlawful means, his allegation that this de-
fendant engaged in a conspiracy is without merit.

Affirmed.

Mr, JusTICE YETKA took no part in the consideration or deci-
sion of this case.

APPENDIX
BYLAWS, RULES AND REGULATIONS
OF THE MEDICAL STAFF
Sr. Mary’s Hosprrau
DuLuTH, MINNESOTA
1974
PREAMBLE
Recognizing that the medical staff is responsible for the quali-
ty of medical care in the hospital and must accept and assume
this responsibility, subject to the ultimate authority of the hospi-
tal governing body, and further recognizing that the cooperative
efforts of the medical staff, the administrator and the governing
body are necessary to fulfill the hospital’s obligation to its
patients, the physicians and dentists practicing in St. Mary’s
Hospital, Duluth, Minnesota, hereby organize themselves in con-
formity with the Bylaws, Rules and Regulations hereinafter
stated.
ee ok
ARTICLE IV
CORRECTIVE ACTION
Section 1. Procedure
(a) Whenever the activities or professional conduct of any
member of the staff shall be considered to be lower than the
standard of the hospital or the medical staff or to be disruptive to
the operations of the hospital, the chief of the department or sec-
tion involved, the chief or vice-chief of staff, the administrator
or the governing body may request in writing, making specific
reférence to the activity or conduct involved, corrective action.
(b) Such request shall be addressed to the Executive Com-

Be

391
mittee of the staff, and if the corrective action could result in
a reduction or suspension of staff privileges, the matter shall be
referred to the chief of the department or section involved, who
shall within three (8) days appoint a committee to investigate
the matter. The committee shall grant an interview to the staff
member against whom corrective action is requested, and within
ten (10) days of the appointment of such committee the depart-
ment or section involved shall make a report to the Executive
Committee. The Executive Committee may issue a warning or a
letter of reprimand or may impose terms of probation or require
consultation or may recommend reduction, suspension or revoca-
tion of privileges. If action is contemplated by the Executive Com-
mittee which could affect the staff member’s privileges, the staff
member shall be given an opportunity to appear before the Ex-
ecutive Committee.

(c) Any recommendation of the Executive Committee involv-
ing a reduction, suspension or revocation of privileges or sus-
pension or revocation from the medical staff shall be referred
to the governing body through the administrator, and the af-
fected staff member shall be entitled to the procedural rights set
forth in these Bylaws.

Section 2. Summary Suspension

(a) The administrator, the chief of the medical staff or the
chief of each department or section shall have the authority
whenever the best interest of patient care in the hospital is con-
cerned, to summarily suspend all or any portion of the privileges
of any staff member, which suspension shall become effective
immediately upon imposition. A staff member whose privileges
have been so suspended shall be entitled to a hearing before the
Executive Committee of the medical staff within five (5) days
after the imposition of such suspension. The Executive Com-
mittee may modify, continue or terminate the suspension and
if said hearing does not result in termination, the staff member
involved shall be entitled to review by the governing body:

(b) The chief of staff or-the chief of the department:or sec-

392 a

tion shall provide alternate coverage for the staff member’s pa-
tients being treated within the area of privileges covered by, the
suspension who are still in the hospital at the time of the sus-
pension.
ARTICLE V
- HEARING AND REVIEW PROCEDURE

Section 1. Right to Hearing

(a) When any staff member or applicant is advised of a
recommendation by the Executive Committee that would or
could, if approved by the governing body, affect his appointment.

or reappointment to the medical staff, his status as a member

of the medical staff or his hospital privileges, he shall be entitled
to a hearing before a committee. If the Executive Committee,
following such hearing, continues a recommendation adverse to
the practitioner, he shall then be entitled to a review by the gov-
erning body before final decision of the governing body.
Section 2. Request for Hearing

(a) The administrator shall give prompt written notice to
any staff member or applicant of an adverse recommendation
or decision who is entitled to a hearing. Failure by the practi-
tioner to request a hearing in writing within five (5) days after
receipt of such notice shall be deemed a waiver of the right to
any hearing or appellate review. Within five (5) days after re-
ceipt of a written request for a hearing, the chief of staff shall
appoint a committee of not less than three (8) members of the
active medical staff, designating one as chairman and said com-
mittee shall schedule a hearing within ten (10) days after the
date of receipt of the request for hearing, and the administrator
shall promptly advise the practitioner involved in writing of
the date of such hearing. The notice of date of hearing shall also
state in concise language the acts or omissions with which the
practitioner is charged or the grounds of any adverse recom-
mendation. .

(b) The hearing need not be conducted according to rules
of law and any relevant matter shall be considered. The com-

| 393

mittee shall make a written record of the hearing. Failure of the
practitioner involved to appear for said hearing shall be-deemed
a waiver of all rights to a hearing or further review.

(c) Within five (5) days after conclusion of the hearing, the
committee shall make a written report and recommendation and
shall forward the same to the chief of staff. Upon receipt thereof
the chief of staff shall convene the Executive Committee which
may modify, confirm or reject the original adverse recommenda-
tion and shall forward its recommendation to the governing body
through the administrator.

Section 8. Appeal to the Governing Body

(a) Within five (5) days after receipt of notice of an adverse
recommendation or decision made or confirmed after a hearing
as hereinbefore provided, the affected practitioner may in writ-
ing request review thereof by the governing body. If such review
is not requested within said five (5) day period, the practitioner
shall be deemed to have waived all rights to review and to have
accepted such adverse recommendation or decision.

(b) Within fifteen (15) days after receipt of such notice of
request for review, the Medical Staff Committee of the governing
body shall schedule a date for review which shall not be more
than five (5) days thereafter and shall advise the practitioner
involved of the time and place thereof. The affected practitioner
will be required to submit his views in writing to the Medical
Staff Committee and shall be given an opportunity to appear be-
fore the committee, The Medical Staff Committee shall review
the written recommendation of the Executive Committee and
may review the pertinent files, records, documents or evidence
involved. Within ten (10) days after the date of such review, the
Medical Staff Committee shall make its recommendation to the
governing body to affirm, modify or reverse the recommendation
of the Executive Committee or may recommend referral of the
matter back to the Executive Committee of the medical staff for
further review and recommendation within fifteen (15) days.

(c) At its next regular meeting following the conclusion of

394 es

the procedures set forth.above, the governing body shall make
its final decision in the matter and shall, through the administra-
tor, send notice to the Executive Committee and to the affected
practitioner. No practitioner shall be entitled a right to more
than one hearing and one review on any matter which has been
the subject of action by the Executive Committee of the medical
staff or by the governing body or by the Medical Staff Com-
mittee of the governing body.

(d) The governing body may itself initiate such hearing
procedure and review and the same shall take the form of
reference to the Executive Committee of the medical staff, and
the procedure for hearing and review set forth herein shall be
followed.

Section 4. Notices :

(a) When any notice of hearing or request for review in
writing is required by these Bylaws, the same shall be sent by
certified mail, return receipt requested.

GORDON E. WASS AND ANOTHER, d.b.a. .
ELK RIVER SKELLY TRUCK STOP, AND ANOTHER
v. THE HONORABLE WENDELL
ANDERSON AND OTHERS.

_ 252.N, W. 2d 131.

March 25, 1977—No. 46721.

ee

Pe

Dorn & Berglund and Wilbur F. Dorn, Jr., for appellants.
Warren Spannaus, Attorney General, Richard B. Allyn, Solici-
tor General, and Stephen F. Befort, Special Assistant Attorney
General, for state respondents.

John IT. Hoeft, for chairman, Metropolitan Council.

Popham, Haik, Schnobrich, Kaufman & Doty and David S.
Doty, for Chairman, Metropolitan Transit Commission.

Considered and decided by the court en bane.

PETERSON, JUSTICE.

Plaintiffs are individuals and corporations doing business as
commercial truck stops. They brought suit against defendants,
seven state officers and two other individuals, for a declaratory
judgment that L. 1975, c. 208, is unconstitutional because it vio-
lates Minn. Const. art. 4, § 17, the “single subject rule” ;1 and
because it violates art. 4, § 21, proscribing passage of a bill on
the last day of the legislative biennial session. The trial court
granted defendants’ motion for summary judgment. Plaintiff
appeals from the entry of summary judgment on the sole ground
that L. 1975, c. 208, violates the single subject rule.

Laws 1975, c. 208, is a lengthy act with a lengthy title. The act
is described in its title as “An act relating to transportation.”
This general description is followed by a more specific descrip-
tion of the sections of the act. The title reads:

“An act relating to transportation ; increasing the tax on gaso-
line and special fuels; eliminating the excise tax on certain

1 Minn. Const. art. 4, § 17, provides: “No law shall embrace more than
one subject, which shall be expressed in its title.”

396 ee

products from waste materials; decreasing the tax levies au-
thorized for the metropolitan transit commission; providing for
a redefinition of the transit taxing district; authorizing contract
service beyond the boundaries thereof; authorizing a limited tax
outside the boundaries thereof; providing for public transit
assistance and demonstration projects; establishing conditions
upon the construction of certain highways; amending a route
on the interstate system; adding additional routes to the trunk
highway system; providing for the construction of acoustical
barriers on interstate highways; reapportioning five percent
of the highway user tax; allocating part of the tax for bridge
purposes; proposing an amendment to the Minnesota Constitu-
tion, Article XIV to permit proceeds from future increases in
motor fuel taxes to be deposited in the state treasury and remov-
ing certain restrictions on highway bonds; appropriating money;
amending Minnesota Statutes 1974, Sections 161.081; 161.082,
by adding a subdivision; 161.12; 296.02, Subdivision 1; Chapter
296, by adding a section; and Laws 1974, Chapter 534, Section
4, Subdivision 4, and Section 5, Subdivision 8; and Laws 1975,
Chapter 18, Section 71, Subdivisions 1, 2, 4, and by adding a sub-
division; repealing Laws 1974, Chapter 534, Section 5, Subdivi-
sion 4.”

The act contains 28 sections whose substance is summarized be-
low:

Sections 4-8: redefine the metropolitan transit taxing district
and reduce the rate of tax which the Metropolitan Transit Com-
mission (MTC) may levy therein; authorize the MTC to sell
transit service beyond the district; authorize the levy of taxes
within the metropolitan transit area but without the metropoli-
tan transit taxing district; redefine the conditions for the lower
fare available to those under 18, which service is subsidized by
this tax.

Sections 9-18, 27: amend L. 1974, c. 584, with respect to the
powers of the state planning agency in administering the supple-
mental public transit aid program; appropriate money to this

| 397

program and for its administration; and allocate certain unobli-
gated funds to the public transit demonstration program.

Sections 1-3: increase the excise tax on gasoline used to fuel
motor vehicles driven on public highways and exempt certain
fuel from the tax.

Sections 25, 26: propose an amendment to Minn. Const. art
14 (“Public Highway System”) to provide that revenues derived
from any increase over the August 1, 1975, excise tax rate on fuel
be paid into the general fund in the state treasury; and to elimi-
nate certain limitations on bonds issued to finance the construc-
tion, improvement and maintenance of a trunk highway system.

Section 20: authorizes construction of acoustical barriers
along interstate highways and allocates funds from the gasoline
excise tax for this purpose.

Sections 14, 15, 18, 19: appropriate money to the department
of highways for completion of 1975 construction; prohibit con-
struction on certain trunk highways; authorize certain other
road construction; redefine one existing trunk highway and add
several new routes to the trunk highway system.

Sections 22-24: provide that a certain percentage of the high-
way user tax distribution fund be expended on certain town road
bridge structures.

Sections 16, 17, 21: authorize review of the uncompleted sec-
tions of the interstate highway system in the 7-county metropoli-
tan area and appropriate funds to the metropolitan council for
that purpose; establish a legislative study commission to evaluate
the policies, programs, projects, costs and financing of the Min-
nesota department of highways.

Section 28: provides for the effective dates of the various
provisions.

We have described the purposes of the single subject rule,
Minn. Const. art. 4, § 17, in numerous cases, and we have cau-
tioned that a statute should be invalidated by authority of art.
4, § 17, only if the challenged statute embodies the mischief
sought to be prevented by that provision. See, e. g., Thomas v.

398° a

Housing & Redevelopment Authority of Duluth, 234 Minn. 221,
48 N. W. 2d 175 (1951) ; Johnson v. Harrison, 47 Minn. 575, 50
N. W. 928 (1891). Article 4, § 17, contains two proscriptions
—one with respect to subject; the other, title—-which serve inde-
pendent though interrelated purposes.

The function of the title requirement is to provide notice of
the interests likely to be affected by the law and “to prevent sur-
prise and fraud upon the people and the legislature by including
provisions in a bill whose title gives no intimation of the nature
of the proposed legislation.” Johnson v. Harrison, 47 Minn. 575,
577, 50 N. W. 928, 924. Similarly, we have said that the purpose
of the requirement that the one subject be expressed in the title
“4s to prevent [the title] from being made a cloak or artifice to
distract attention from the substance of the act itself.” State ex
rel. Olsen v. Board of Control, 85 Minn. 165, 175, 88 N. W. 533,
587 (1902).

The reason behind the requirement that each law embrace but
a single subject is well-described in State v. Cassidy, 22 Minn.
812, 822 (1875):

«+ * * The well-known object of this section of the consti-
tution, which declares that ‘no law shall embrace more than one
subject, which shall be expressed in its title,’ was to secure to
every distinct measure of legislation a separate consideration
and decision, dependent solely upon its individual merits, by pro-
hibiting the fraudulent insertion therein of matters wholly for-
eign, and in no way related to or connected with its subject, and
by preventing the combination of different measures, dissimilar
in character, purposes and objects, but united together with the
sole view, by this means, of compelling the requisite support to
secure their passage.”

The “combination of different measures, dissimilar in character,
* * * united together with the sole view, by this means, of com-
pelling the requisite support to secure their passage” is a practice
commonly known as “logrolling.” See, Johnson v. Harrison, 47
Minn. 575, 577, 50 N. W. 928, 924. In simpler terms, logrolling

a 399

can be described as “the attachment of undesirable ‘riders’ upon
pills certain to be passed because of their public popularity or
desirability.” 1A Sutherland, Statutory Construction (4 ed.)
§ 17.01.

’ Plaintiffs argue that L. 1975, c. 203, is unconstitutional on
both subject and title grounds. They contend that the law violates
the single subject provision in two ways: (1) that section 25
proposes a constitutional amendment which is a single subject
in and of itself; and (2) that the statute exemplifies the prac-
tice of logrolling. Additionally, plaintiffs argue that the title,
“Taln act relating to transportation,” is too broad to express a
single subject.

1. Plaintiffs characterize as their strongest argument the
contention that a proposed constitutional amendment is a single
subject in and of itself. In proof of their assertion, plaintiffs ask
the court to take judicial notice of their research which shows
that all constitutional amendments ever proposed by the Minne-
sota legislature before c. 203 were proposed in separate bills.

Plaintiffs concede that the constitution imposes no require-
ment as to the form a proposed constitutional amendment must
take. That it might be preferable for the legislature to propose
amendments separately rather than to include them in bills con-
taining other provisions is a matter addressed to legislative dis-
eretion and not judicially cognizable. Our concern is whether c.
203 contains more than a single subject.

Section 25 of L. 1975, c. 208, proposes an amendment to Minn.
Const, art. 14, entitled “Public Highway System.” Article 14 and
the proposed amendment to it concern excise taxes levied upon
means used to propel vehicles on the public highways and bonds
issued to finance the construction of the trunk highway system.
Other sections of c. 203 concern these same matters. If all the
provisions of a law relate to a single subject, Minn. Const. art.
4, § 17, is not offended by the fact that some of the provisions.
are ultimately to be embodied in the constitution and others in
various statutes.

400 es

Plaintiffs argue that one purpose of the single subject rule
is “to secure to every distinct measure of legislation a separate
consideration and decision * * *.” State v. Cassidy, 22 Minn.
312, 322. They submit that no measure is deserving of more con-
sideration than an amendment to the constitution. But the Cas-
sidy court was concerned with distinct measures of legislation;
i.e. with “prohibiting the fraudulent insertion * * * of mat-
ters wholly foreign, and in no way related to or connected with
its subject * * *.” 22 Minn, 822. There is no suggestion of fraud
here. The subject matter of the proposed amendment is germane
to that of the rest of c. 203. The single subject rule was not in-
tended to inhibit comprehensive legislation. Individual provisions
can, in fact, often best be considered when read in juxtaposition
to other provisions to which they relate.

Furthermore, the legislature merely proposes amendments to
the constitution. The people decide whether to adopt them, Minn.
Const. art. 9. § 1. In contrast, the legislature’s decision on statu-
tory matters is final. Thus there is no justification for applying
the prophylactic purposes of art. 4, § 17, more strictly to a
constitutional amendment than to other legislative acts.2

® The Minnesota Constitution does not prescribe either the form or
the manner of submitting a proposition for an amendment to the peo-
ple, leaving this to the judgment and discretion of the legislature. State
ex rel. Marr v. Stearns, 72 Minn. 200, 218, 75 N. W. 210, 214 (1898). Minn.
St. 3.20 provides that “[e]very act for the submission of an amendment
to the constitution shall set forth the section as the same will read in
case the amendment is adopted, with such other matter only as may
be necessary to show in what section or article the alteration is pro-
posed. It shall be submitted and voted upon at the general election next
ensuing in the manner provided for by the general law relating to such
elections. * * *’ Section 3.21 provides that the attorney general, at least
4 months preceding such election, shall furnish to the secretary of state
a statement of the purpose and effect of all amendments proposed
showing ‘clearly the form of the existing sections and of the same as
they will read if amended; and in the October preceding the election
the secretary of state shall give 2 weeks’ published notice of such state-
ment in all legal newspapers of the state. Section 2034.31, subd. 2, pro-
vides that in the preparation of the prescribed ballot “* * * the secre-

ee

as 401

We hold that a proposed constitutional amendment is not a
single subject in itself and that the single subject provision,
Minn. Const. art. 4, § 17, is not violated by the inclusion of a pro-
posed amendment in a bill containing other provisions so long
as the amendment and the other provisions are all germane to
the same general subject.

Plaintiffs argue that the act contains another “mischief”
sought to be prevented by Minn. Const. art. 4, § 17, in that it ex-
emplifies the practice of logrolling. In proof, plaintiffs ask the
court—

«* * * to take judicial notice of House and Senate Journals
for 1978 and 1975, and specifically, of the numerous attempts.
to gain passage of certain elements ultimately contained in Chap-
ter 208, when those elements were proposed standing by them-
selves. * * * In the 1973 and 1975 sessions, approximately 30
pills were introduced concerning the subject of increases in gas
tax, the use of acoustical barriers, constitutional amendments
regarding the highway trust fund, freeway construction mora-
toriums, change in user tax apportionment, miscellaneous bond-
ing bills for trunk highways and transit purposes, and an ap-
propriation to the highway commissioner from the general fund.
Repeated efforts by certain elements in the legislature to enact
these provisions separately failed time and time again. Only
when these elements were contained in what amounts to an
‘omnibus bill’ were the measures able to gain approval.”

Plaintiffs’ argument is misdirected. Logrolling is the combina-
tion of different and disconnected subjects. That certain provi-

tary of state shall apply an appropriate title to each proposition and
question, which title shall be approved by the attorney general, and
shall consist of not more than one printed line above the proposition
or question to which it refers.” The opposition to the amendment as-
serted in the instant litigation is somewhat mooted by the defeat of the
amendment at the polls. An affirmative vote of 989,296 was required
for its passage, but it received only 552,593 affirmative votes out of
1,978,590 votes cast in the general election.

402 be

sions individually failed of enactment does not mean that com-
bined in a single bill they comprise different and disconnected
subjects. None of the provisions of this bill can. be characterized
as “riders,” having no relation to the general subject of the bill.
As we stated in Johnson v. Harrison, 47 Minn. 575, 577, 50 N. W.
928, 924, and have repeated in numerous subsequent cases:

“Again, while this provision is mandatory, yet it is to be given
a liberal, and not a strict, construction. It is not intended nor
should it be so construed as to embarrass legislation by making
Jaws unnecessarily restrictive in their scope and operation, or
by multiplying their number, or by preventing the legislature
from embracing in one act all matters properly connected with
one general subject. The term ‘subject,’ as 'used in the constitu-
tion, is to be given a broad and extended meaning, so as to allow
the legislature full scope to include in one act all matters having
a logical or natural connection. To constitute duplicity of subject,
an act must embrace two or more dissimilar and discordant
subjects that by no fair intendment can be considered as having
any legitimate connection with or relation to each other. All that
is necessary is that the act should embrace some one general
subject; and by this is meant, merely, that all matters treated
of should fall under some one general idea, be so connected with
or related to each other, either logically or in popular under-
standing, as to be parts of, or germane to, one general subject.”

Every matter incorporated in c. 203 concerns the use, financing
and construction of a public highway transportation system. In
more general terms, c. 208 is an act “relating to transporta-
tion.” The act does not exemplify impermissible logrolling.

2. Plaintiffs’ final argument is that the term “transporta-
tion” is too broad to express a single subject. In State ex rel.
Pearson v. Probate Court, 205 Minn. 545, 552, 287 N. W. 297,
301 (1989), affirmed, 309 U. S. 270, 60 S. Ct. 523, 84 L. ed. 744,
126 A. L. R. 580 (1940), we said:

«« * * The generality of the title of an act is no objection,
provided only it is sufficient to give notice of the general subject

as 403

of the proposed legislation and of the interests likely to be af-
fected. The title was never intended to be an index of the law.
x ek £ RO
“A title broader than the statute, if it is fairly indicative of
what is included in it, does not offend the constitution.”

Furthermore, “[i]t is not essential that the best or even an ac-
curate title be employed, if it be suggestive in any sense of the
legislative purpose.” State ex rel. Olsen v. Board of Control, 85
Minn. 165, 175, 88 N. W. 588, 537.

“Transportation” is a general term. But no legislator could
be misled by it. Anyone interested in any of the particulars of the
bill would be advised by the title to look to the body of the law—
or at least to look to the list of section subjects also detailed in
the title. Correlatively, anyone not interested in any aspect of
transportation would not later be surprised by any provision
passed under the auspices of this act “relating to transporta-
tion,” because no unrelated provisions are hidden surreptitious-
ly within it.

As already noted, not only did the legislature give the law the
general title of “[a]n act relating to transportation” but it also
described the subject of each section. This court has said that:

«* * * The subject may be expressed generally or by a
description of its parts or subdivisions. The general subject need
not be stated in the title if it is clearly disclosed or can be readily
inferred from the details expressed.” C. Thomas Stores Sales
System, Inc. v. Spaeth, 209 Minn. 504, 512, 297 N. W. 9, 15
(1941).

The subject is expressed both ways in this title. Certainly taken
as a whole, even if not by either of its two parts alone, the title
is fairly indicative of the contents of the law.

Affirmed.

404 es

|
|
|
. |
GERADEEN DANEK, A MINOR, BY ALEX DANEK, |
HER GUARDIAN, AND ANOTHER v. MELDRUM
MANUFACTURING AND ENGINEERING COMPANY, INC.
|

252 N. W. 24 255.

March 25, 1977—No. 46645.

Robins, Davis & Lyons, Stanley FE. Karon, and Paul L. Gingras,
for appellants.

Jardine, Logan & O’Brien, Graham Heikes, and Charles EB.
Gillin, for respondent.

ee 405

Heard before Kelly, Todd, and MacLaughlin, JJ., and con-
sidered and decided by the court en banc.

MACLAUGHLIN, JUSTICE.

This is an appeal from a summary judgment entered in favor
of defendant, Meldrum Manufacturing and Engineering Com-
pany, Inc. (Meldrum). The trial court found as a matter of law
that plaintiff Geradeen Danek, employed by Labor Pool of St.
Paul, Inc. (Labor Pool), was also an employee of Meldrum when
she was injured while operating Meldrum’s punch press machine,
and was thus barred by the provisions of the workers’ compensa-
tion law from suing Meldrum as a third-party tortfeasor. For
the reasons stated in this opinion, we affirm.

Labor Pool is a labor broker in the business of supplying indus-
trial personnel to local companies for short term assistance. It
advertises for and hires employees who are then sent to fill
temporary jobs with other companies which are its customers.
Labor Pool sets the rate of compensation and makes payment
directly to these employees for the work they perform for Labor
Pool’s customers. Each customer, in turn, pays Labor Pool an
hourly rate for the services of the temporary workers obtained.
In addition to a margin for profit, the difference between the
hourly rate Labor Pool pays directly to its employees and the
hourly rate paid to Labor Pool by its customers is used by Labor
Pool to cover the cost of various overhead expenses, including
workers’ compensation insurance.

Meldrum is the largest stamping processor in the state of Min-
nesota and manufactures metal specialties by use of punch press
machines. Meldrum first became a customer of Labor Pool in
March 1974 and frequently utilized Labor Pool employees during
the succeeding months. When Meldrum needed temporary help,
it would call Labor Pool to request extra employees to work as
machine operators for a particular day.

In September 1974, the plaintiff, 16-year-old Geradeen Danek,
went to the Labor Pool office in St. Paul to obtain employment.
She was told that Labor Pool would hire her, would assign her

406

work at various plants.throughout the city, and would pay her
$2 an hour regardless of where she was sent. She was told to re-
port to the Labor Pool office before 7 a. m. for a job assignment
on any day when she wanted employment.

The first few times plaintiff reported for work, Labor Pool
sent her to three different companies. Plaintiff was advised each
morning of the jobs which were available for that day and had
the right to choose the place she wanted to go. When she did not
want a particular assignment, plaintiff had the right to refuse
it and did so on at least one occasion.

On the morning of September 26, 1974, plaintiff reported to
the Labor Pool office at the usual time and was told of work
available that day at Meldrum. According to plaintiff's affidavit,
when she was informed a job as a punch press operator was
available at Meldrum she “decided to accept this plant.” Later
that same day while operating a punch press machine, plaintiff
sustained injury to three fingers of her left hand.

Following the accident, plaintiff filed for and received work-
ers’ compensation benefits from Labor Pool’s insurer. Sub-
sequently, she brought this action against Meldrum as a third-
party tortfeasor on the ground that her injury was the result of
Meldrum’s negligence. The trial court ordered summary judg-
ment in favor of Meldrum, finding that plaintiff was an em-
‘ployee of both employers at the time of the accident and that her
suit was barred by the exclusive remedy provided by the workers’
compensation law.t

Plaintiff raises three issues on appeal: (1) Whether the trial
court properly found, as a matter of law, that Meldrum was
plaintiff’s employer and thus protected from liability as a third-
party tortfeasor; (2) whether Meldrum had waived its right to
claim plaintiff as an employee; and (3) whether an illegally em-

1Minn. St. § 176.031 provides in pertinent part: “The liability of an
employer prescribed by this chapter is exclusive and in the place of any
other liability to such employee, his personal representative, surviv-
_ ing spouse, parent, any child, dependent, next of kin, or other person
entitled to recover damages on account of such injury or death.”

ee 407

ployed minor may bring a common-law tort action against an
employer.

The first issue raised by plaintiff is whether the trial court
properly determined as a matter of law that she was employed
by both Labor Pool and Meldrum on the day of her injury, limit-
ing her to the exclusive remedy provided pursuant to the work-
ers’ compensation law. The question to be determined is whether
plaintiff and her injury were within the workers’ compensation
law since it has been uniformly held that the statutory compensa-
tion would then be the sole remedy and that any recovery at com-
mon law is barred. Prosser, Torts (4 ed.) § 80, p. 581.

We consider here for the first time the “loaned-servant doc-
trine” with respect to that subclass of general employers known
as labor brokers, who supply temporary workers to special em-
ployers. The loaned-servant doctrine provides that if an employer
loans an employee to another for the performance of some special
service, then that employee, with respect to that special service,
may become the employee of the party to whom his services have
been loaned. Restatement, Agency 2d § 227.

This common-law principle applies to cases arising under the
workers’ compensation act and allows an employee to be simul-
taneously in the general employment of one employer and in the
special employment of another. Thus, the loaned employee not
only remains the employee of the person who loaned him but also
may be the employee of the person to whom he is loaned. 3
Schneider, Workmen’s Compensation Text (Perm. ed.) § 779.
In such cases, the employee may look to one or to the other or to
both employers for compensation since he is at the same time
under a general and a special employment relationship. Ibid.
§ 788.

Whether the employee should be regarded as a loaned employee
in the service of the special employer or whether he should be re-
garded as remaining solely in the service of his general employer
depends upon several factors when considered within the context
of workers’ compensation cases. Three conditions must be satis-

408 a

fied before the loaned-servant doctrine may be applied to a
special employer to whom an employee has been sent by a general
employer. The rule is set forth in 1A Larson, Workmen’s Com-
pensation Law, § 48.00, as follows:

“When a general employer lends an employee to a special em-
ployer, the special employer becomes liable for workmen’s com-
pensation only if

“(a) the employee has made a contract of hire, express or
implied, with the special employer;

“(b) the work being done is essentially that of the special
employer; and

“(c) the special employer has the right to control the details
of the work.

“When all three of the above conditions ame satisfied in rela-
tion to both employers, both employers are liable for workmen's
compensation.” (Emphasis supplied.)

Although plaintiff argues that she was solely in the employ
of Labor Pool, it is evident that Labor Pool’s only function as
a labor broker was to furnish personnel to fill the temporary
labor needs of other employers. The fact that Labor Pool hired
and had the right to fire plaintiff, compensated her directly, and
paid the expenses of her social security taxes and workers’ com-
pensation insurance did not give Labor Pool the right to control
the details of the performance of her work. The work plaintiff
performed was solely Meldrum’s and only Meldrum had the right
to control the particular act giving rise to her injury. See,
Nepstad v. Lambert, 235 Minn. 1, 50 N. W. 2d 614 (1951).

Therefore, we have no doubt that conditions (b) and (c) are
satisfied in the instant case since the work performed by plain-
tiff was that of Meldrum, and since Meldrum had the right to
control the details of the work. However, as to condition (a) we
must determine whether plaintiff had consented to the special
employment relationship as evidenced by the existence of a con-
tract of hire, express or implied, with Meldrum. Consent is of
primary importance since the application of the loaned-servant

|

— ee 409

doctrine in workers’ compensation cases causes an employee to
relinquish the right to sue his special employer at common law
for negligence. 1A Larson, Workmen’s Compensation Law, §
48.10, p. 8-206.2

We have held that a new relationship cannot be thrust upon
an employee without his knowledge or consent. Moreover, the
employee must understand that he is submitting himself to the
control of a new master. Petschow v. Scheid, 259 Minn. 474, 108
N. W. 2d 1 (1961). Although an employee’s consent may be im-
plied from his acceptance of the special employer’s control and
direction, what seems on the surface to be such acceptance may
be no more than continued obedience to the general employer’s
commands. 1A Larson § 48.10, p. 8-214. See, Darvell v. Paul A.
Laurence Co. 289 Minn. 55, 57 N. W. 2d 881 (1953). .

We recently held in Rademaker v. Archer Daniels Midland Co.
310 Minn. 240, 247 N. iW. 2d 28 (1976), that when a defend-
ant raises the loaned-servant doctrine as an affirmative defense
to a plaintiff’s tort claim, the burden rests with the defendant
to prove that there was consent to the alleged special employ-
ment relationship. We stated that the control test alone was not
determinative and emphasized our adherence to the rule that
where an employee’s rights are to be affected by his characteriza-
tion as a loaned employee, especially in the context of workers’
compensation cases, the employee’s consent to the special em-
ployment relationship is essential. However, we specifically re-
served any opinion with respect to the question of labor brokers
as general employers, stating that it might be appropriate in
those circumstances “to infer the employee’s consent to a special
employment relationship as a matter of law * * *.” (310 Minn.
247, 247 N. W. 2d 82).

The trial court in the instant case relied almost exclusively on

2 Workers’ compensation cases differ from those where an injured
third party seeks to impose vicarious liability on the special employer
of a loaned employee who caused his injury since the loaned employee
himself loses no personal rights under those circumstances.

410 |

the landmark case of St. Claire v. Minnesota Harbor Service, Inc.
211 F, Supp. 521 (D. Minn. 1962), in which the facts are similar.
In St. Claire, the general employer was Manpower, Inc., whose
sole function was to furnish personnel to fill the temporary labor
needs of its customers. Plaintiff, a manual laborer, was injured
while cleaning the defendant’s barge and sued the defendant as
a third-party tortfeasor. The federal district court, in awarding
summary judgment to the defendant, said:

“It is therefore the opinion of this Court that where the pri-
mary employer (Manpower here) does no more than provide
personnel for the use of the ultimate employer (the defendant
here), where the fees received by the primary employer from
the ultimate employer include provision for Workman’s Compen-
sation coverage for the employees supplied, where this Work-
man’s Compensation was in force at the time of the accident, and
where the injury occurred (1) while the employee was under the
control of the ultimate employer (the defendant here) and (2)
while the employee was engaged in a task which all the parties
(the plaintiff, the defendant and Manpower) must be deemed
to have contemplated that the employee would perform (i.e.,
while the plaintiff was within the scope of his employment),
then the injured employee cannot sue the ultimate employer as
a third-party tort-feasor.” 211 F. Supp. 528.

It has been uniformly established in other jurisdictions which
have considered the elements of control and consent in labor-
broker cases that the temporary worker does become the em-
ployee of the labor broker’s customer. These cases have implied
both the necessary elements of control and consent, making sum-
mary judgment proper. 1A Larson, Workmen’s Compensation
Law, § 48.23, p. 8-238.

In Beaver v. Jacuzzi Brothers, Inc. 454 F, 2d 284 (8 Cir. 1972),
the Circuit Court of Appeals barred a similar tort action when
an employee fell on the special employer’s premises where she
had been sent on temporary assignment by Kelly Girl, Inc. The

ee AML

court noted that “[a]s a matter of common experience and of
present business practices in our economy, it is clear that an em-
ployee may be employed by more than one employer even while
doing the same work.” 454 F, 2d 285.

Renfroe v. Higgins Rack Coating & Mfg. Co. Inc. 17 Mich. App.
259, 169 N. W. 2d 326 (1969), held that whether a customer
utilizing the services of an employee furnished by a labor broker
was an “employer” within the workers’ compensation law was
not a question of fact for a jury to decide but was appropriate
for summary judgment and reasoned:

“In analyzing the triangular relationship in question here, we
may ask, what was the economic reality for each of the three
parties? By going to the ETS dispatch room, Roy Renfroe agreed
to work for ETS, and since the only work to be done was that
of ETS’s customers, Renfroe must necessarily have agreed to
work for the customers of ETS as well (in this case, Higgins
Co.). Renfroe did in fact submit to the direction of the ETS dis-
patcher in the dispatch room and of Higgins’ foreman in the fac-
tory.

x oe FR

“The economic reality of this case is that both ETS and Hig-
gins Co. were employers of Roy Renfroe, each in a different way.
It is not necessary to make fine semantic distinctions as to types
of degrees of control, etc. It is enough to say that either could
be liable under the workmen’s compensation act, therefore, both
are protected by it.” (Emphasis supplied.) 17 Mich. App. 266,
169 N. W. 2d 829.

In Wright v. Habco, Inc. 419 S. W. 2d 34 (Mo. 1967), a plain-
tiff hired by Manpower, Inc., was sent to work for the defendant
and was injured on the job. The trial court concluded as a matter
of law that the plaintiff was defendant’s special employee and
entered summary judgment. On appeal, in addition to finding
the requisite element of control because the plaintiff's work was
performed under the exclusive direction of the defendant’s fore-
man, the court explained:

412 Le

«“* * * we think it is quite clear that plaintiff consented to
work for defendant and that such was pursuant to an implied
contract between them. In this case plaintiff knew when he was
hired by Manpower that all of his work would actually be per-
formed for various customers of his general employer. The very
fact that he entered into an employment arrangement of that
nature would constitute a general consent to work for special
employers such as defendant.” 419 S. W. 2d 36.

See, also, Hamilton v. Shell Oil Co. 233 So. 2d 179 (Fla. App.
1970); Blessing v. T. Shriver and Co. 94 N. J. Super. 426, 228
A, 2d 711 (1967) ; Daniels v. MacGregor Co. 2 Ohio St. 2d 89, 206
N. E. 2d 554 (1965); Chickachop v. Manpower, Inc. 84 N. J.
Super. 129, 201 A. 2d 90 (1964).

Because we agree with the reasoning of these cases, we hold
that plaintiff should be deemed to have consented to perform
services for Meldrum; that all of the necessary elements of the
Joaned-servant doctrine are present; that plaintiff was therefore
an employee of Meldrum as well as Labor Pool; and that sum-
mary judgment in favor of Meldrum was appropriate.

I The second issue raised by plaintiff is based on her argu-
ment that Meldrum has waived its right to claim plaintiff as an
employee because of its acceptance of the terms and conditions
of Labor Pool’s work order. The work order provided that “CUS-
TOMER acknowledges and agrees that the persons assigned by
LABOR POOL are the employees of LABOR POOL, and not the
employees of CUSTOMER * * *,.”

The terms of the work order did not change the legal relation-
ship of the parties since the nature of that relationship must be
ascertained not from the label given to it by the parties them-
selves but from the consequences which the law attached to their
arrangements and to their conduct. Edelston v. Builders and Re-
modelers, Inc. 304 Minn. 550, 229 N. W. 2d 24 (1975); Elwell
v. Fake, 264 Minn. 829, 119 N. W. 2d 19 (1962). Therefore, de-

— 413

fendant did not waive the right to claim plaintiff as its employee
by the terms of any agreement.®

I Finally, defendant argues that an illegally employed minor
should have the right to bring a common-law tort action against
an employer, despite the provisions of the workers’ compensation
law.‘ The Minnesota Workers’ Compensation Act was amended
by L. 1945, c. 233, § 2, to include all minors without distinction
as to the legality or illegality of their employment. Minn. St.
176.011, subd. 9(2).5 Since the act now applies to all minors, the
remedies of the act are exclusive and common-law actions against

3 Plaintiff also maintains that Meldrum’s response to a letter from
plaintiff’s counsel which stated that plaintiff “was an employee of La-
bor Pool” at the time of the accident should be deemed conclusive to
establish the legal relationship of the parties. Again, this involves a de-
termination of law and Meldrum is not bound by its own erroneous con-
clusion.

4 Plaintiff alleges a violation of the Fair Labor Standards Act but this
issue may not be raised for the first time on appeal. It was not con-
sidered by the court below and thus is not subject to review by this
‘court. Komatz Construction, Inc. v. Western Union Tel. Co. 290 Minn.
129, 186 N. W. 2d 691 (1971), Plaintiff also argues that Meldrum vio-
lated the Minnesota Child Labor Standards Act. However, at the time
of plaintiff’s injury, no regulations had been adopted pursuant to Minn.
St. 1814.04, subd. 5, which would prohibit a minor under 18 years of age
from being employed to operate a punch press machine. In any event,
even had the statute been in effect, the only penalty provided for its
violation is conviction of a misdemeanor. Minn. St. 181A.12, subd. 2.

5 Minn. St. 176.011, subd. 9, provides in part: “ ‘Employee’ means any
person who performs services for another for hire; and includes the fol-
lowing:

_* eK

“(2) aminor.”

Minn. St. 176.091 further provides: “A minor employee has the same
power to enter into a contract, make election of remedy, make any set-
tlement, and receive compensation as an adult employee, subject to the
power of the commissioner of the department of labor and industry,
compensation judge, or worker’s compensation court of appeals to re-
quire the appointment of a guardian for the minor employee to make
such settlement and to receive moneys thereunder or under an award.”

14 Es

&.

an employer are barred: We conclude that plaintiff's claim is
without merit.
Affirmed.

Le}
STATE v. GARY BRUCE FOSSEN.

255 N. W, 2d 357.

March 25, 1977—No. 47121.

be 415

ee

Warren Spannaus, Attorney General, Robert W. Johnson,
County Attorney, and Robert A. Stanich, Assistant County At-
torney, for appellant.

Meshbesher, Singer & Spence, Ronald I, Meshbesher, and Carol
Grant, for respondent.

Douglas Cann and David W. Larson, for Minnesota County
Attorney’s Council, amicus curiae, seeking reversal.

Heard before MacLaughlin, Scott, and Stahler, JJ., and con-
sidered and decided by the court en banc.

MACLAUGHLIN, JUSTICE.

Defendant, Gary Bruce Fossen, is charged by indictment with
three counts of murder in the first degree, Minn. St. 609.185. The
State of Minnesota appeals from a pretrial order of the district
court suppressing certain statements made by defendant while
being held in the Anoka County jail. For the reasons stated here-
in, we affirm.

On February 25, 1976, the Anoka County sheriff’s office re-
ceived a report of a shooting in the city of Ramsey. The report
was relayed to that office by the Ramsey police department dis-
patcher. Investigators from the Anoka County Major Crime In-
vestigation Unit (MCIU) were dispatched to 7127 Highway 10,
N. W., the scene of the crime. They were met by members of the
Ramsey and Anoka City police departments, who advised them
that there were three bodies in the house. The MCIU investiga-
tors walked through the house and found the bodies of one male
and two females, later identified as LeRoy and Muriel Fossen,
defendant’s parents, and Linda Fossen Helm, defendant’s sister.
All three were dead from shotgun wounds.

A16 a

‘Two separate investigators spoke with defendant at the scene
as he was seated in a squad car outside the house. Without ad-
ministering a Miranda warning, they separately questioned de-
fendant about his knowledge of the circumstances surrounding
the shootings. Both investigators testified that their purpose in
questioning defendant at this point in time was merely to gather
information ; they did not consider him to be a suspect.” The trial
court found that these statements were admissible, and that find-
ing is not challenged on appeal.

Defendant told the officers that at about 6 p.m. he had begun
working on his car in a garage behind the house. Shortly there-
after he returned to the house to get a can of beer. Upon entering
he discovered his father lying on the floor of the living room,
covered with blood, and saw the bodies of his mother and sister
lying nearby. According to defendant, his father was holding
a shotgun. When defendant picked up his father, the elder Fossen
purportedly said something to defendant such as “brown car”
or “they’re getting away in a brown car” and then slumped in
defendant’s arms. Defendant said that he tried to take the gun
from his father’s hands and it discharged into the wall. Defendant
stated that he then jumped up to run outside and summon help.
As he left the house, he could see the taillights of a vehicle leav-
ing the premises. He attempted to pursue in a truck, but was un-
able to catch up because of traffic so he returned to the scene and
summoned help.

Both investigators related that at the time they were ques-
tioning defendant he appeared dazed and upset. Defendant was
taken, without objection, to the Anoka County jail, to be finger-
printed and to have his hands tested for gunshot residue. The
purpose of obtaining defendant’s fingerprints was to differenti-

1 See, Miranda v. Arizona, 384 U. S. 436, 86 S. Ct. 1602, 16 L. ed. 2d 694
(1966).

2 The police were initially uncertain whether they were dealing with
a double murder and suicide, or a triple murder.

Le AIT

ate them from any others found at the scene. Prints were also
taken of each of the victims.

Upon arriving at the jail, and prior to submitting to the
fingerprinting and testing, defendant conferred with his at-
torney, Roger Nurnberger, who had been summoned by defend-
ant’s fiancee. Defendant was then released and proceeded to
a local motel, where he spent the night.

Sergeant Leonard G, Christ, Jr., of the Anoka County sheriff’s
office was in charge of the lab work at the scene of the murders
and was also present at the autopsies of the victims. It was
Sergeant Christ who first discounted the murder-suicide theory,
principally because it appeared that it would not have been pos-
sible for LeRoy Fossen to inflict his own wounds with the shot-
gun. As a result of this and other findings, and their contradic-
tion of defendant’s statements, suspicion focused on defendant
and he was arrested. He was not advised of his constitutional
rights at that time.

At the time of arrest, defendant’s fiancee was allowed to call
Attorney Nurnberger, who agreed to meet defendant at the
Anoka County jail. Defendant was taken to jail and booked. Be-
tween the time of his arrest and booking, he made no state-
ments.

After defendant was booked, but before he spoke with his at-
torney, he asked Investigator Richard Culton of MCIU why he
had been arrested. Culton advised defendant that his arrest had
been prompted by the discovery of discrepancies between his
original statements and the physical evidence. Defendant then
indicated a desire to speak with his attorney before he had any
further discussions with the police.

Subsequently, and without any further conversation with the
police, defendant was allowed to confer privately with Nurn-
berger. At the end of the conversation, Investigator Culton was
advised by Nurnberger that defendant did not want to make any
statement.

The next day Investigator Culton again spoke to defendant.

418 ee

Neither Culton nor any other police officer at that time, or at
any other time, delivered a Miranda warning to defendant. The
ostensible purpose of Culton’s interview with defendant was to
obtain the information necessary to complete a pretrial release
information form for bail evaluation. During this interview, de-
fendant told Culton that he had changed attorneys and had al-
ready spoken to Kenneth Meshbesher. Culton asked if defendant
and Meshbesher had discussed whether defendant would make
a statement. Defendant said he had discussed that question with
Meshbesher and Meshbesher had advised him not to talk to the
police. However, defendant said he might still be interested in
talking with Culton because he “was innocent.” Culton testified
that he explained to defendant that his attorney, in advising him
to remain silent, was aware that any statement made by defend-
ant might be used in court. Culton then testified, “I asked him
if he understood his rights, or if they had been explained by his
attorney, and he said they had.” Culton administered no further
warning, nor did he contact or attempt to contact defendant’s
counsel. Culton and defendant then proceeded to discuss the case
in a conversation which lasted over 4 hours.

Later that evening Culton again sought out defendant to dis-
cuss the case. He merely reiterated to defendant by way of warn-
ing that “his lawyer was probably concerned that he might say
something that could be used against him in Court.” This dis-
cussion was of a much shorter duration than the first. It termi-
nated when Culton felt that defendant was becoming “uncom-
fortable.” The next morning Culton once more sought to discuss
the case with defendant, but defendant refused to cooperate.
Again, before both of these two interviews, Culton made no at-
tempt to administer a complete Miranda warning to defendant,
nor did he attempt to contact defendant’s retained counsel.

At the omnibus hearing the trial court ruled that all of the
statements made to Investigator Culton were taken in violation
of defendant’s constitutional rights. The trial court based the
suppression of the statements made to Culton upon the failure

a 419

of the police to advise defendant of his right to have an attorney
present during questioning. In the trial court’s memorandum,
he stated, in part, as follows:

«* * + Tt is admitted that the Miranda warning was not given
to the Defendant. The Court is of the opinion that each admoni-
tion contained in the required Miranda warning is important.
Each admonition is designed to assure a defendant that he is
aware of the stated constitutional rights for to be unaware of
them is in effect to be deprived of them.

“The Defendant was warned that he had a right to remain
silent and that anything he said may be used against him. The
fact that he was not warned that he had a right to an attorney
is rendered moot by the fact that he did in fact retain not one
but two attorneys. The most important warning that was not
given the Defendant was his right to consult with his attorney
and to have him present during interrogation. * * *

x *&£ * *

“Tt appears that the investigative authorities were as sur-
prised as was this Court to find that no formal Miranda warning
was given in a case involving three charges of first degree
murder against a single defendant. * * *”

The importance of the right to have counsel present during
interrogation was well stated by the United States Supreme
Court in Miranda:

“The circumstances surrounding in-custody interrogation can
operate very quickly to overbear the will of one merely made
aware of his privilege by his interrogators. Therefore, the right
to have counsel present at the interrogation is indispensable to
the protection of the Fifth Amendment privilege under the sys-
tem we delineate today. Our aim is to assure that the individual’s
right to choose between silence and speech remains unfettered
throughout the interrogation process, A once-stated warning,
‘delivered by those who will conduct the interrogation, cannot
itself suffice to that end among those who most require knowl-

420

edge of their rights. A mere warning given by the interrogators
is not alone sufficient to accomplish that end. * * * Even pre-
liminary advice given to the accused by his own attorney can be
swiftly overcome by the secret interrogation process. Cf. H'sco-
bedo v. Illinois, 378 U. S. 478, 485, note 5 [84 S. Ct. 1758, 1762,
12 L. ed. 2d 977, 988]. Thus, the need for counsel to protect the
Fifth Amendment privilege comprehends not merely a right to
consult with counsel prior to questioning, but also to have counsel
present during any questioning if the defendant so desires.
ee # ek

“Accordingly we hold that an individual held for interrogation
must be clearly informed that he has the right to consult with
a lawyer and to have the lawyer with him during interrogation
under the system for protecting the privilege we delineate today.
As with the warnings of the right to remain silent and that any-
thing stated can be used in evidence against him, this warning
is an absolute prerequisite to interrogation. No amount of cir-
cumstantial evidence that the person may have been aware of
this right will suffice to stand in its stead. Only through such
a warning is there ascertainable assurance that the accused was.
aware of this right.” 384 U. S. 469, 86 S. Ct. 1625, 16 L. ed. 2d
721. (Emphasis supplied.)

The state asserts first that defendant did in fact receive such
a warning. In a statement prepared by Culton after obtaining
the information for the pretrial release information form he
stated that he asked defendant if he “fully understood his rights
in respect to talking to me without an attorney present.” In our
judgment, this statement, if made, does not satisfy the require-
ment that specific notice be given to a defendant that he has a
right to have counsel present during interrogation. Many per-
sons will answer affirmatively when asked if they “know their
rights” even though they may not, and Miranda requires specific
and clear notice of the right to consult with and have counsel
present during interrogation..

as 421

The burden of establishing that the requisite warning was
administered lies with the state and must be established by a pre-
ponderance of the evidence, State v. Wajda, 296 Minn. 29, 206
N. W. 2d 1 (1978) ; Lego v. Twomey, 404 U. S. 477, 92 S. Ct. 619,
30 L. ed. 2d 618 (1972). The state had the burden to establish
the nature and extent of the warnings given by Investigator Cul-
ton and could readily have examined him thoroughly on that pre-
cise issue while he was under oath rather than relying on his
written statement. We agree with the trial court that the state
failed to carry its burden of proof.

I It is asserted, however, that even if none of the police of-
ficers adequately advised Fossen of his rights, this requirement
was obviated by his consultation with counsel immediately after
his arrest and before he made any statements. This contention
has two fatal deficiencies. First, it is the state’s burden to estab-
lish that each element of the Miranda warnings was made known
to the accused, and in the instant case there is no evidence of
what advice defendant’s attorney gave to defendant. Although
the state argues that “the conclusion is inescapable that his
rights in this regard had been fully explained,” it seems clear
that the mere fact of consultation with counsel may not presump-
tively replace a full and effective warning as administered by
the authorities. As stated in Miranda, no amount of circumstan-
tial evidence that an accused is aware of his right to the presence
of counsel will suffice to stand in the stead of a clear, unequiv-
ocal warning.

Second, even if the accused has some knowledge of his rights,
the warning administered by the police has an additional im-
portance:

“The Fifth Amendment privilege is so fundamental to our sys-
tem of constitutional rule and the expedient of giving an ade-
quate warning as to the availability of the privilege so simple,
we will not pause to inquire in individual cases whether the de-
fendant was aware of his rights without a warning being given.

422 be

Assessments of the knowledge the defendant possessed, based
on information as to his age, education, intelligence, or prior con-
tact with authorities, can never be more than speculation; a
warning is a clearcut fact. More important, whatever the back-
ground of the person interrogated, a warning ut the time of the
interrogation is indispensable to overcome its pressures and to
insure that the individual knows he is free to exercise the
privilege at that point in time.” Miranda v. Arizona, 384 U. S.
468, 86 S. Ct. 1625, 16 L. ed. 2d 721. (Emphasis supplied.)

Assertions as to what advice defendant’s counsel gave him are
no more than speculation; additionally, no such consultation can
serve the purpose of insuring that the accused felt free to exer-
cise his rights when confronted by Culton. Therefore, standing
alone, the fact that defendant conferred with his counsel before
he spoke with police does not establish that defendant was fully
aware of the nature and extent of his constitutional rights, and
the trial court properly concluded that the state had failed to
meet its burden of proof in this regard.

II The state nonetheless asserts that defendant waived his
right to have counsel present. Consideration of any waiver by
defendant of his right to have counsel present during question-
ing presupposes a valid explanation to defendant of those
rights. Waiver is, by definition, the intentional relinquishment
of a known right or privilege, Johnson v. Zerbst, 304 U. S. 458,
464, 58 S. Ct. 1019, 1023, 82 L. ed. 1461, 1466 (1988). In the ab-
sence of a valid warning, there can logically be no voluntary and
intelligent waiver.

HM Nor do we find that the statements made by defendant
were volunteered, and thus not the product of a custodial inter-
rogation. It is clear from the record that the conversations were
instigated by the police, in the first instance ostensibly to obtain
bail information. While we need not reach the issue because of
our determination that the statements obtained are otherwise in-
admissible, we note that Rule 6.02, subd. 8, Rules of Criminal Pro-

BT

be 423,

cedure, could arguably provide an independent basis for the ex-
clusion of the statements given to Culton.?

HI While we rest our decision on the considerations already
expressed, our opinion is buttressed by the fact that no attempt
was made by any law enforcement officer to insure that defend-
ant’s counsel was notified of the interrogation and afforded the
opportunity to be present. This, in spite of the fact that the police
were aware that defendant had been advised to make no state-
ment. We expressed our disapproval of the interrogation of an
accused in the absence of already retained counsel in State v.
Renfrew, 280 Minn. 276, 280, 159 N. W. 2d 111, 113 (1968), in
which we stated:

“Even where a defendant voluntarily and intelligently waives
his constitutional rights, we strongly disapprove of in-custody
interrogations if defendant is represented by counsel and counsel
has not had an opportunity to be present at the questioning.”

We reiterate that disapproval today, in the strongest of terms.
Defendant urges us to adopt a rule holding that no matter what
the circumstances, the statements of an accused who has retained
counsel, made in the absence of counsel, are per se inadmissible.
A most complete and persuasive explication of this rule and its
underlying rationale may be found in People v. Hobson, 39 N.
Y. 2d 479, 384 N. Y. S. 2d 419, 348 N. EH. 2d 894 (1976). Our dis-
position of this case makes the adoption of such a per se exclu-
sionary rule unnecessary, but we direct attention to it so that

8 Rule 6.02, subd, 3, which provides for a prerelease investigation of
an accused’s background in order to determine the conditions of release
on bail, provides in part: “* * * Any information obtained from the de-
fendant in response to an inquiry during the course of the [prerelease]
investigation and any evidence derived from such information, shall
not be used against the defendant at trial.” This is an example of the
manner in which our Rules of Criminal Procedure embrace the consti-
tutional guarantees as enunciated in Miranda v. Arizona, supra. See,
also, Rule 5.01(b).

424 Ee

we may underscore our disapproval of the questioning of an ac-
cused in the absence of his retained counsel.

Defendant is allowed $400 attorneys fees.

For the reasons stated herein, the order of the district court

is affirmed.
Le

IN RE PETITION OF WOLF LAKE CAMP, INC. v.
COUNTY OF ITASCA.

252 N. W. 2d 261.

March 25, 1977—No. 46335.

EE
Fryberger, Buchanan, Smith, Sanford & Frederick, Harold

A. Frederick, and Michael K. Donovan, for appellant.

Knetsch & Bang and James J. Bang, for respondent.

Considered and decided by the court en banc.

YeErKA, JUSTICE.

This case involves the assessment of real property for purposes
of real property taxes under Minn. St. 273.18, subd. 4. The prop-
erty involved is a private camp in Itasca County consisting of
approximately 4,200 contiguous acres owned by a single owner.

—— ee 425

The trial court classified 18 percent of the property as “real
estate devoted to temporary and seasonal residential occupancy
for recreational purposes” to be assessed at 38 1/3 percent of its
market value, and the remaining 82 percent as “all other” land
pursuant to Minn. St. 273.18, subd. 9, to be assessed at 43 per-
cent of market value. Appellant property owner appeals from
the judgment entered. We reverse.

The issue raised on appeal is whether for purposes of classify-
ing “real property devoted to temporary and seasonal residential
occupancy for recreational purposes” under Minn. St. 273.13,
subd. 4, contiguous parcels of real property under the ownership
of a single entity and devoted to a single purpose must be classi-
fied as a unit.

Appellant, Wolf Lake Camp, Inc. (“Camp”), is a private, non-
profit corporation. It owns and maintains 4,200 acres of property
in Itasca County, Minnesota, for the recreational use of its seven
shareholders, their families and guests. Each shareholder of the
Camp uses the premises on a temporary basis throughout the
year. Four of the seven shareholders have cabins at the Camp.
There is an additional residential structure for members who
have not built a cabin of their own, and also a cabin for the care-
taker. All six structures are contained within a single part of the
Camp. The remainder of the land is used exclusively for recrea-
tiona] purposes. The approximately 4,200 contiguous acres which
make up the Camp are composed of about 3,200 acres of land and
about 1,000 acres of lakes. The land owned by the Camp consti-
tutes a square land mass about 4 miles by 4 miles.

The Camp property is listed in the Itasca County auditor’s as-
sessment book as 109 separate parcels. All descriptions in the
assessment book come directly from deeds which are filed of
record, The Itasca County assessor assessed the property as 109
different parcels. The trial court described the procedure as fol-
lows: :

“Tn Itasca County, up to this point in time, the county auditor
delivers to the county assessor pursuant to Minn. Stat. 273.03

426 Es

the assessment books and blanks which lists separately each gov-
ernment subdivision or platted lot and where there. are multiple
owners of any such parcels the list is further broken down to
show the portion thereof owned by each owner. In determining
into which class real estate should be placed for tax purposes,
the county assessor considers separately each item of property
as submitted in the county auditor’s list. This is his approach to
the matter of classification whether the list describes the real
estate on the basis of an entire government subdivision or platted
lot or in portions only of either of the foregoing. The assessor
then. requires that each such item, on the auditor’s list possess
each of three characteristics which he finds to be required by
Minn. Stat. 278.18, Subd. 4 before he will accord it a class 3
classification. That is, he requires for class 8 (1) that the use be
temporary and seasonal, (2) that it be for residential occupaney,
and (8) that it be for recreational purposes. The fact that a par-
cel of land, here used in the sense of a government subdivision,
is used for recreation purposes will not qualify it as class 3 prop-
erty unless there is something thereon relatable to the seasonal
residential occupancy of another parcel in common ownership
even though such parcels may be contiguous. In this regard, he
requires some structure reasonably necessary to the occupancy
of the residence or some condition of the land such as main-
tenance of a lawn for the residence or of the roadway necessary
for ingress and egress * * * before he will accord to such parcel
without a residence the same class 8 classification as is always
given to the parcel on which the residence is located.”

Using this system for purposes of assessment in 1978 for taxes
payable in 1974, the county assessor classified 12 of these parcels
as class 8 real property devoted to temporary and seasonal resi-
dential occupancy under Minn. St. 278.18, subd. 4. This corre-
sponded generally to the parcels on which the residential build-
ings are located. The assessor classified the remaining 97 parcels
as “all other” land under Minn. St. 273.18, subd. 9, and assessed
them at 48 percent.

ee 427

The Camp then petitioned the district court pursuant to Minn.
St. 278.01 claiming the assessor should have classified the entire
Camp property as class 8 real estate devoted to temporary and
seasonal residential property for recreational purposes. The trial
court held the method of assessment used by the assessor met
the statutory requirements. Using this standard, however, the
trial court determined the assessor erred in failing to include 8
additional parcels as class 8 property.! Following an entry of
judgment, the Camp appealed to this court.

A. History of the Provision for Treatment of “Temporary and
Seasonal Residential Occupancy for Recreational Pur-
poses.”

The first provision for temporary and seasonal residential oc-
cupancy for recreational purposes was passed during the 1959
legislative session and became effective May 1, 1960. L. 1959,
c. 338, § 1. It did not apply to commercial purposes. In 1971
“market value” was substituted for “full and true value.” L.
1971, c. 427, § 3. The statute was amended to its present form
in 1973 by the addition of commercial property. L. 1978, c. T74.
B. Previous Judicial Interpretations of the Statute.

This is the third case in which this court has been asked to
interpret the application of Minn, St. 278.18, subd. 4. The perti-
nent part of that section provides:

«* * * All real property devoted to temporary and seasonal
residential occupancy for recreational purposes, and which is
not devoted to commercial purposes for more than 200 days in
the year preceding the year of assessment, shall be class 3 prop-
erty and assessed accordingly. For this purpose, property is de-
voted to commercial use on a specific day if it is used, or offered
for use, and a fee is charged for such use.”

Real property so classified is assessed as “class 3” property at

83 1/8 percent of market value.

1 These represented parcels on which the roadway to the residences
was located and also the land on which a grass landing strip was lo-
cated. -

428

The two previous cases in which this court interpreted Minn.

St. 278.18, subd. 4, are Otis Lodge, Inc. v. Commissioner of Taxa-
tion, 295 Minn. 80, 206 N. W. 2d 3 (1972), and Lilja v. County
of Wright, 807 Minn. 276, 239 N. W. 2d 465 (1976). In Otis, this
court made four basic interpretations of the “temporary and sea-
sonal residential occupancy for recreational purposes” language
of Minn. St. 278.18, subd. 4. First, the use to which the land is
put, not the inherent nature of the land itself is controlling; that
is, the test is what the land is devoted to, not what it can be de-
voted to. Second, the words “devoted to” in the phrase “devoted
to temporary and seasonal residential occupancy for recrea-
tional purposes” means “chiefly and not wholly.” 295 Minn. 84,
206 N. W. 2d 7. Third, the word “seasonal” in the same phrase
means “those periods of the year when recreational activities
are practical and feasible because of climatic conditions.” 295
Minn. 90, 206 N. W. 2d 10. Finally, any interpretation of the
statute would in all likelihood apply to both commercial and pri-
vate property.

In the second case, Lilja, this court held that residential city
property used for an occasional weekend of relaxation and
gardening was not devoted to “recreational purposes” within
the meaning of the statute.

Thus, to come within the scope of the provision, the actual use
of the real property must be chiefly for temporary residential
occupancy for recreational use during those periods of the year
when recreational activities are practical and feasible because
of climatic conditions,

C. Application of the Statute to Wolf Lake Camp, Inc.

No serious question is raised that the entire Camp is used for
recreational purposes. Nor is a serious question raised that part
of the Camp is used for seasonal residential occupancy. However,
the parties dispute the wnét of classification. In upholding the
decision of the assessor, the trial court held that there was no
reason that just because one parcel or tract forming a part of the

eee 12D

unit ownership meets all three criteria of the statute that all
other parcels or tracts owned by him must be similarly treated.

The key statutory section is Minn. St. 272.08, subd. 6, which
defines “tract”:

“Subd. 6. ‘Tract,’ ‘lot,’ ‘parcel,’ and ‘piece or parcel’ of land
means any contiguous quantity of land in the possession of,
owned by, or recorded as the property of, the same claimant or
person.”

To date, this court has not definitively interpreted the applica-
tion of this definition in a case such as the present one.

In support of their position that the Camp must be classified
as a unit, the Camp advances two arguments. The first is that
the real property taxation statutes, when viewed as a whole,
show the legislature has always expressly stated any size limita-
tions on classifications if it so intended. In support they cite the
homestead exemption contained in Minn, St. 273.185 and the pos-
sible apportionment required by Minn. St. 273.13, subd. 19.2

The second argument advanced by the Camp is that the method
used by the assessor is based solely upon the timing of the own-
er’s acquisition of the property. The Camp is assessed as 109 dif-
ferent parcels because it was purchased in 109 different pieces
over a number of years. At present, however, all the parcels are
contiguous and are being used as a unit for a single purpose by
a single owner.

The County of Itasca, on the other hand, contends the absence

2 Minn. St. 273.13, subd. 19, provides: “Residential real estate, other
than seasonal residential, recreational and homesteads shall be classi-
fied as class 3d property and shall have a taxable value equal to 40 per-
cent of market value. Residential real estate as used herein means real
property used or held for use by the owner thereof, or by his tenants
or lessees as a residence for rental periods of 30 days or more, but shall
not include homesteads, or real estate devoted to temporary or seasonal
residential occupancy for recreational purposes. Where a portion of a
parcel of property qualified for class 3d and a portion does not qualify
for class 3d the valuation shall be apportioned according to the respec-
tive uses.” (Italics supplied.)

Pe

430 |
of a specific statutory statement on the exact issue constitutes,
by implication, approval of its method.

We find the arguments of the Camp persuasive for these rea-
sons:

(1) The absence of an express area limitation on the exemp-
tion. When viewed as a whole, the Minnesota property taxation
statutes indicate a clear decision by the legislature not to limit
the area or value of the exemption, As the Camp points out,
where the legislature has intended such a limitation it has sup-
plied one. In the absence of an express limitation here it is not
for this court to imply one. If the class 8 exemption is to be
limited and the Camp thus taxed at a higher rate, the authority
for that change should be clearly expressed. Cf., e. g., O’Brien
v. Johnson, 275 Minn. 805, 148 N. W. 2d 357 (1967) (value of
property used for homestead exemption).

(2) Relationship of the system of classification used by the
county auditor and the statute, The purpose of the general statu-
tory scheme here is to classify property according to use. How-
ever, the system used by the assessor turns almost exclusively
on the timing of the acquisition of the land. Under the plan used
in Itasca County, a person might purchase a single 40-acre plot,
place a cabin on it, and if the property is then devoted to seasonal
recreational use, qualify for a class 8 classification. Another per-
son might purchase an equivalent 40-acre plot in four separate
transactions, but because of the system used by the county would
likely be assessed as four separate parcels. The use, area, and
ownership of each might be equivalent, yet the second person
could be assessed at a rate higher than the first. His taxes would
depend in large part on the timing of the acquisition of the land
and not the use to which the contiguous parcels are put. The
classification system would thus bear little relation to the classi-
fication of land according to use, A simple conveyance out to an-
other person who would then reconvey the land back as a.larger
unit without any change in use would likely change the tax.

Dh 431

To adopt the view of the county would also mean that one tax-
payer could own one acre of land on which he built an elaborate
lake home costing a half million dollars and yet have the entire
parcel of land and buildings be assessed at only 33 1/3 percent.
Another, as in this case, could own several thousand acres worth
perhaps the same amount but have a small cottage worth very
little located on one parcel. Under the theory of the county he
would be assessed at a ratio of 33 1/8 percent on the cottage and
one parcel, and be assessed at 43 percent on the balance. We do
not believe the legislature intended such a result. See, Minn. St.
645.17, subd. 1, The county is not being unjustly and irrational-
ly deprived of tax revenues by assessing the land on the basis
of the 33 1/3-percent ratio.

As a final matter, although appellant has not raised a consti-
tutional issue as to the classification of lands for taxation in Min-
nesota, we take note that under the position taken here by the
county many part-time residents could be taxed at a much higher
rate than full-time, year-round residents notwithstanding a sub-
stantially lower use of governmental services. Because of the
homestead exemption and the less than 33 1/3-percent assess-
ment for many types of rural, including agricultural, lands this
disparity could well exist even though appellant prevails in this
case and is assessed at 83 1/3 percent. The legislature must have
been aware of the situation when it allowed this new classifica-
tion for recreational use.

Reversed and remanded to the trial court with direction to
enter judgment assessing all of appellant’s property at 33 1/3
percent,

Reversed and remanded.

STATE v. MARK WENDLER.

 252.N. W. 2d 266.

March 25, 1977—No. 45689,

C. Paul Jones, State Public Defender, and Roger H. Hippert,
Assistant State Public Defender, for appellant.

Warren Spannaus, Attorney General, Richard G. Mark, Assist-
ant Solicitor General, Richard B. Allyn, Assistant Attorney Gen-
eral, Gary Hansen, Special Assistant Attorney General, and Rob-
ert J. Berens, County Attorney, for respondent.

Heard before Rogosheske, Kelly, and Scott, JJ., and considered
and decided by the court en banc.

Scort, JUSTICE.

This is an appeal by Mark Wendler from a judgment of con-
viction of murder in the second degree. We affirm,

At the time of the incident involved, defendant was 19 years
old, living in Mankato and, because of a disability in his hip
caused by a motor vehicle accident, being assisted by the Man-
kato Rehabilitation Center, which placed him with a Mankato
nursing home as an orderly. On May 8, 1974, defendant left Man-

Le 433

kato to spend the weekend with his family on their farm near
Comfrey in Brown County. On the following day, Saturday, he
spent some time target shooting with a .22-caliber rifle and a .22-
caliber target pistol. Defendant’s sister, Marcia, aged 14, accom-
panied him and asked to shoot the pistol. Because their mother
forbade this, they decided to go some distance from the farm-
house. As they walked through a grove, defendant raised the pis-
tol with his left hand and, from a distance of about 15 feet, killed
Marcia instantaneously with one shot in the back of the head.
Defendant then put the pistol in his right hand and shot himself
in the head. District Court Judge Noah Rosenbloom found that
defendant intentionally shot and killed his sister and that he was
legally sane at the time of the act. A postconviction hearing was
held before District Court Judge Miles Zimmerman, who found
that there was a substantial basis for a finding of guilty.

The two issues stated by defendant in his brief read as follows:

“TI. Did [defendant] prove that he was insane at the time of
offense charged by a preponderance of the evidence?

“The trial court held: In the negative. ;

“TI. Was [defendant] denied his constitutional right to con-
front the witnesses against him by the prosecution’s elicita-
tion of hearsay testimony from [defendant’s] psychiatrist?

“The trial court did not rule.”

I The standard for acquittal by reason of insanity is stated
in Minn. St. 611.026:

“No person shall be tried, sentenced, or punished for any crime
while mentally ill or mentally deficient so as to be incapable of
understanding the proceedings or making a defense; but he shall
not be excused from criminal liability except upon proof that at
the time of committing the alleged criminal act he was laboring
under such a defect of reason, from one of these causes, as not
to know the nature of his act, or that it was wrong.” (Italics sup-
plied.) . , .

Defendant claims that in State v. Rawland, 294 Minn. 17, 199

434

N. W. 2d 774 (1972), this court effected a more liberal construc-
tion of Minn. St. 611.026. That case does not support such an as-
sertion. We said in Rawland:

“(b) In determining whether or not a defendant has met the
burden imposed on him by statute to prove absence of guilt be-
cause of insanity, the factfinder may give credence to competent
evidence that relates to cognition, volition, and capacity to con-
trol behavior. The basic question of fact remains, however,
whether in the light of this burden and this evidence the defend-
ant was laboring under such a defect of reason as not to know
‘the nature of his act, or that it was wrong.’ ” 294 Minn. 46, 199
N. W. 2d 790.

The court therefore clearly held that a factfinder may consider
any competent evidence that relates to cognition, volition, and
capacity to control behavior, but the standard for a legal find-
ing of insanity was not altered. The trial court considered Raw-
land and found that defendant was cognitive of his actions, acted
volitionally, and had the capacity to control his behavior.
Defendant here did not testify, but the court had the benefit
of an examination by Sheriff Ervin Weinkauf and Deputy
. Sheriff Harry Thorau of Brown County. This interrogation was
quite thorough and was instigated by a call from defendant’s
father to the sheriff indicating that his son wished to speak to
the authorities. In this interrogation on May 18, defendant could
give absolutely no reason for shooting his sister but said he shot
himself because, “When I seen what I done to my sister I just
couldn’t face it.” He also indicated that he had aimed a gun in
the past at his other sister but did not fire and had thought of
shooting his mother once, but that neither of them were aware
of this. Deputy Thorau asked the defendant:

“Q. Can you somehow possibly, Mark, explain as to what
could have went through your mind? I mean what possibly could
have prompted you or caused you to do that? Did you see her as
she was standing there possibly signifying something else to you?
What could have possibly gone through your mind?

as 435

“A, It’s kind of hard to describe. She just—she just turned
around and was just standing there and all of a sudden I just
pulled the trigger for no reason.”

And concluded the interrogation as follows:

“Q. Isee. In other words, Mark, to wind this up, it is with
the full knowledge now as you are here and you are fully aware
and you can recall as to what happened and you are telling me
now that you raised your left hand, pulled the trigger point blank
at Marcia’s neck and the cause of this was that she died?

“A. Yes.

“Q. And this shot was not an accident, this was a deliberate
act of shooting, is this what you are saying, Mark?

“A. I guess that’s what you’d call it, yah.”

Judge Zimmerman in his memorandum and findings following
the postconviction hearing noted:

“* * * The trial court also could consider the confession or
recorded statement taken from [defendant] by the sheriff’s de-
partment. It could also consider his remarks and acts imme-
diately following the crime. It could note the absence of testi-
mony demonstrating that he was anything but a peaceable man
prior to the murder and that there was lacking a definite history
of mental illness of the type found afterwards. The history of
mental illness in the Rawland case was extensive. It could also
find uncertainty and ambivalence in Dr. Eggert’s testimony.”

Dr. Delmer C. Eggert, the defense psychiatrist, indicated that
he examined defendant on June 18, 1974, with the benefit of the
Immanuel-St. Joseph Hospital records and prior examinations
made by Dr. Benjamin Lund, a psychiatrist, and Dr. Robert
Long, a certified consulting psychologist, since the shooting.
From this 2-hour interview and the other psychiatric reports,
Dr. Eggert concluded that defendant was schizophrenic, and that
he was mentally ill and did not know that his act was wrong.

The trial judge concluded: .

436 Le

“There is no doubt but what defendant knew the weapon in
his hand was a gun. The act [of] firing at his sister was intended
to inflict death. upon her. It was undertaken in the belief and ex-
pectation death would result and it was deliberately aimed at her
head at virtually pointblank range where fatal outcome was most
likely. There was no illusion about the target; Defendant’s in-
tended victim was Marcia Wendler. The setting, then, of this
homicide was accurately perceived by the defendant.”

The postconviction judge stated: “The Court at the trial level
heard all the testimony and itself interrogated Dr. Eggert to
some length.” He further stated: “The issue of insanity was thor-
oughly litigated at the trial, [and] there is a substantial basis
for the determination made and there is no impediment to it be-
ing brought before the Supreme Court for review.” It is there-
fore felt that the trial court was correct in concluding:

“(2) Though afflicted with a mental illness of a schizo-
phrenic type at the time of his act, defendant knew the nature
of his act and that it was wrong at the time he caused Marcia
Wendler’s death so that he is not relieved of criminal liability
for his act by his mental illness.”

This conforms with State v. Bott, 310 Minn. 331, 246 N. W.
2d 48 (1976), wherein the defense psychiatrist indicated that
the defendant believed someone had implanted wires in his brain
so as to control him by radio transmission and that he suffered
from paranoid psychosis. This court stated:

“There is little doubt from that evidence that defendant was
suffering from mental illness, but under Minn. St. 611.026 he
may not be excused from criminal liability unless that mental
illness caused such a defect of reason that at the time of the inci-
dent defendant did not know the nature of his act or that it was
wrong.” 310 Minn. 384, 246 N. W. 2d 51.

- [Hl The second issue raised by defendant—that he was denied
his right of confrontation because the prosecution elicited hear-
say testimony from defendant’s psychiatrist—seems to be: with-

as 437

out substance upon consideration of the entire record. The record
discloses that upon arraignment the attorney for defendant, in
referring to his request to have Dr. Eggert appointed, stated:

“He has indicated to me that he would like to have an authori-
zation so that he can obtain all of this information, all of the
clinical, the laboratory data, and my understanding is that it
would then be a fairly uncomplicated procedure for him to make
an examination and to do a report, having available to him all
of that.”

This was a reference to the discussion concerning data from the
Sioux Trails Mental Health Center, and from Dr. Lund and Dr.
Long.

Then, when Dr. Eggert took the stand at trial and upon direct
examination by defense counsel, he said:

“* * * There was some correspondence which had arrived
earlier and this was from the offices of Dr. Lund and from Sioux
Trails Mental Health Center and portions of his hospital record
from Immanuel-St. Joseph’s Hospital. This was a hospitaliza-
tion that had occurred shortly before I saw him.”

He later indicated.that he also had the psychological report sub-
mitted to him by Dr. Long. It is therefore difficult to understand
how, under these circumstances, cross-examination regarding
that upon which his opinion was based, including the difference
between his conclusions and those of Dr. Lund, violated defend-
ant’s constitutional rights.

Affirmed.

Mr. CHIEF JUSTICE SHERAN took no part in the consideration
or decision of this case.

CAROL L. FAUST v. STATE,
DEPARTMENT OF REVENUE.
GROUP HEALTH PLAN, INC., INTERVENOR,

252 N. W. 2d 855.

March 25, 1977—No. 46891.

Laurence F. Koll, for relators.
Paul V. Rieke, for respondent.

Considered and decided by the court without oral argument.
Per CURIAM,

Certiorari upon the relation of Group Health Plan, Inc., in-
tervenor, and Carol Faust, employee of respondent employer,
State of Minnesota, to review a decision of the Workers’ Com-
pensation Board (now the Worker’s Compensation Court of
Appeals) denying benefits for an injury employee sustained
during the lunch hour. We reverse.

Employee works for the Department of Revenue at the Cen-
tennial Office Building, which fronts on Cedar Street just south
of the Capitol. The main entrance to the building is in the mid-
dle of the building. Opposite the building and across Cedar Street
is a large grassy mall, which is part of the grounds of the Cap-
itol complex. The Centennial Building has a privately operated
cafeteria where state employees and other people may buy and
eat their lunch. Employees who bring their lunch to work may
use the cafeteria without making any purchases there. Em-

ee 439

ployees are forbidden to eat their lunch at their desks but they
are not required to eat their lunch in the Centennial cafeteria.
In fact, during the summer months many employees eat their
lunch on the front steps of the Centennial Building or across Ce-
dar Street, on the grassy mall. Many employees who eat on the
mall cross Cedar Street in the middle of the block directly in
front of the main entrance to the Centennial. Building rather
than go to the crosswalks at the ends of the block.

On August 16, 1973, employee’s lunch break was from 12:30
to 1 p.m, At approximately 12:35 she left the Centennial Build-
ing by the midblock front entrance and prepared to cross the
street to eat her lunch on the mall. While standing partly in the
street looking to her left for oncoming traffic in the northbound
Jane, a van which was to her right backed up and struck her,
causing the injuries for which she seeks compensation.

If employee had been injured while on her way to the cafe-
teria, it is clear that she would be entitled to compensation un-
der the premises rule.t See, Lassila v. Sears, Roebuck & Co. 302
Minn. 350, 224 N. W. 2d 519 (1974) (compensation awarded to
employee injured during unpaid, unsupervised lunch period in
cafeteria operated by employer for convenience of employees).
However, here the employee was off the premises at the time
of the injury, and so the issue is whether, notwithstanding that
fact, she still is entitled to compensation.

Employee’s basic argument in support of her claim to com-
pensation is that (a) the grassy mall on which she and her fellow
employees frequently ate their lunch was in effect part of the
premises of her employment, (b) she was following the cus-
tomary and notoriously used route between the building and the
mall when she was hit, and (c) that route was a special hazard

1 Larson restates that general-premises rule as follows: “As to em-
ployees having fixed hours and place of work, injuries occurring on the
premises while they are going to and from work before or after work-
ing hours or at lunchtime are compensable * * *.” 1 Larson, Work-
men’s Compensation Law, § 15.00.

440 es

sufficiently connected with the premises to justify an excep-
tion to the general rule denying compensation to injuries of an
employee when he is off the premises.

A majority of two of the three commissioners rejected this
argument, their reasoning being that the mall was not a part of
the premises and that once she left the building and stepped on
the sidewalk, she was part of the general public and any injury
that occurred was not employment connected.

The dissenting commissioner relied primarily on the recent
ease of Goff v. Farmers Union Accounting Service, Inc. 308
Minn. 440, 241 N. W. 2d 315 (1976), stating that he felt the
instant case was indistinguishable.

In Goff, the employee was struck by a car as she was crossing
the street in midblock on her way to the employee parking lot
which was just across the street from the building where she
worked. Although there were crosswalks which the employee
could have used, as well as a tunnel, the midblock route which
employee took was the one which employee and most of the other
employees customarily used, a custom of which the employer was
aware. In affirming a compensation award, this court stated that
this route was a special hazard of employee’s job and that there-
fore compensation was proper notwithstanding the fact that
employee’s injury occurred off the premises.

In arguing that the Goff case is indistinguishable, the dissent-
ing commissioner made a number of points. First, he stated that
the fact that the injury in this case occurred during the lunch
hour rather than after work by itself made no difference. We
agree with this because, as Professor Larson states in his trea~
tise, “the trip away from and back to the premises for the pur-
pose of getting lunch is indistinguishable in principle from the
trip at the beginning and end of the work day, and should be
governed by the same rules and exceptions.” 1 Larson, Work-
men’s Compensation, § 15.51.

- The main point made by the dissenting commissioner is the
one with which the majority took issue, specifically, that the
mall area, like the parking lot in Goff, is part of the employer’s

a “

premises. Whether or not the mall area to which employee was
walking may be said to be part of the employer’s premises is
the decisive issue in this case. The mall is unquestionably owned
by the state and was used by employees of various departments
during their lunch hours. We conclude that the area is part of
the employer’s premises, and that therefore the case is indis-
tinguishable from Goff.

We have not found any cases precisely in point on this issue
but in reaching this conclusion, we have relied in part upon
Jewel Cos. v. Industrial Commission, 57 Ill. 2d 88, 310 N. E.
2d 12 (1974). Claimant in that case worked in a large indus-
trial park maintained by his employer, who had established sev-
eral cafeterias and restaurants for the employees. On his lunch
hour claimant was injured while going to a cafeteria in a dif-
ferent section of the park than that in which he worked. Af-
firming a compensation award, the court held that all the cafe-
terias were in effect a part of the employer’s premises.

‘The employee in the instant case was not injured while walk-
ing from the Centennial Building to the Capitol in order to eat
in one of the other cafeterias in the Capitol complex. How-
ever, the mall is part of the Capitol complex and is openly and
notoriously used by state employees as a lunch hour picnic and
recreation area in the summer months. In fact, on some sum-
mer days the state “lures” employees onto the mall at lunch
time by sponsoring noon hour concerts. Although the issue is
close, we believe that under the circumstances the park area to
which employee was walking should be deemed to be part of the
employer’s premises, making the Goff case indistinguishable.

Reversed.

Ors, Justice (dissenting).

In my opinion, Goff is entirely distinguishable. There, the em-
ployer furnished the employees a rented parking lot across from
the employees’ place of business, and although he discouraged
employees from jaywalking, the employer did not take effective
measures to prevent it. In Goff we held the parking lot was part

442, es

of the working premises where employees could be expected to
begin and end their day’s work. By no stretch of the imagination
can the Capitol mall be regarded as part of the working premises
for employees of the Centennial Building. They have no greater
privilege to use that area than any non-state employee such as
those employed at Sears Roebuck a block away. Had the employee
been injured while, walking to the Vocational School for lunch,
her status as an employee would not have been any different, but
she would have been denied benefits.

In my opinion, the majority is now affording health and ac-
cident insurance to a state employee simply because she had the
misfortune of being injured while jaywalking on her own time,
off the premises of her employer, headed for a public area of her
own choosing. This I submit was not an activity which under any
construction of the statute was performed in the course of her
employment with the State of Minnesota.

SHERAN, CHIEF JUSTICE (dissenting).
I agree with the views expressed by Mr. Justice Otis.

ROGOSHESKE, JUSTICE (dissenting).
I join the dissent of Mr. Justice Otis.

PETERSON, JUSTICE (dissenting).
I join in the dissent of Mr. Justice Otis.

IN RE THE HONORABLE DONALD E. ANDERSON,
JUDGE OF DISTRICT COURT.

252 N. W. 2d 592,

April 1, 1977—No. 47382.

Sheldon D. Karlins, for petitioner.
Johnson, Fredin, Killen, Thibodeou & Seiler and Conrad M.
Fredin, for respondent.

Considered and decided by the court en banc.

SHERAN, CHIEF JUSTICE.

These proceedings were instituted by the Board on Judicial
Standards pursuant to Minn. St, 490.15 and 490.16 and the Rules
of the Board to inquire into charges of judicial misconduct lodged
against respondent, Judge Donald E. Anderson, The Board
certified its findings of fact, conclusions of law, and recom-
mendation for action to this court. Judge Anderson then peti-
tioned for modification of the Board’s recommendation. Briefs
were filed, and by order of this court the matter was heard upon
oral argument. We accept the Board’s recommendation of sus-
pension without pay for 8 months as the most appropriate sanc-
tion presently available for the instances of judicial misconduct
found to have been committed.

The findings of fact made by the Board are not contested by
Judge Anderson. They established that he is a judge of the district

444 Le

court, sixth judicial district, serving by election to a term com-
mencing in 1967, and by subsequent reelection.

In February 1973 the Board received complaints relating to
alleged failures of Judge Anderson to dispose of and ‘file decisions
in a manner and within the time specified in Minn. St. 546.27.1
By letter dated February 12, 1978, the Board notified Judge
Anderson that it had received these complaints, and requested
a list of all matters currently pending before him.

By letter dated February 28, 1973, addressed to the court ad-
ministrator of the supreme court, respondent replied to the re-
quest of the Board, stating:

“During the past week I was able to get out all of the orders
that I am aware of that are over ninety days over (sic).”

In that letter respondent asked that he be informed of

“other pending orders outstanding that may have come to your
attention.”

On February 23, 1978, the date of respondent’s letter, a num-
ber of matters had been submitted to him for decision, which
matters had not been decided within 90 days.

After hearing further complaints, the Board, on its own mo-
tion, undertook an inquiry and preliminary investigation as to
whether or not in the conduct of his office as judge of the district
court respondent was guilty of persistent failure to perform his
duties, habitual intemperance, or conduct prejudicial to the
administration of justice bringing the judicial office into dis-
repute. On December 22, 1975, the Board served written notice
upon respondent of the nature of the charges which were made

“1 Minn. St. 546.27 provides in part:

«* * * All questions of fact and law, and all motions and matters sub-
mitted to a judge for his decision, shall be disposed of and his decision
filed with the clerk within 90 days after such submission, unless sick-
ness or casualty shall prevent, or the time be extended by written con-
sent of the parties. No part of the salary of any judge shall be paid un-
less the voucher therefor be accompanied by a certificate of the judge
that he has fully complied with the requirements of this section.”

.

a 445

against him and afforded him a reasonable opportunity to present
personally, in writing or orally, such matters as he chose for con-
sideration by the Board explaining, refuting, or admitting the
alleged misconduct. Respondent made no response to such
written notice and the Board concluded that the present formal
proceedings should be instituted. These proceedings culminated
in our present consideration of the Board’s findings of judicial
misconduct.

Most significantly, the Board found that in 1978 or an earlier
year respondent, by telephone or personal contact, approached
Alfred Weinberg and Edward Litman, each of whom was an at-
torney at law engaged in the private practice of law in the same
district in which respondent served as judge, and borrowed
$1,000 from each of the two lawyers. No written evidence of
these loans was given by respondent to the respective attorneys
until after the present proceedings were commenced. While re-
spondent repaid the loans, with interest, out of his savings some-
time in May 1976, he was indebted to Messrs. Weinberg and Lit-
man in the amount of $1,000 during a period when they appeared
before him as counsel in contested litigation. Respondent testi-
fied that at the time he repaid the $2,000 he had no trouble rais-
ing the funds for the repayment because at that time he had the
money on deposit in a savings account. Respondent took the view
that the loans were “on demand.” The lenders never demanded
repayment. The Board felt that such a situation might have gone
on for a number of years if the formal proceedings had not been
initiated.

The Board also found that at the commencement of these pro-
ceedings, Judge Anderson had pending before him 12 matters
which had been submitted for decision more than 90 days
previously. The oldest matter was taken under advisement on
November 5, 1969. Judge Anderson admitted in his answer that
he had failed to dispose of these cases within the required time.
By way of defense, Anderson alleged that his failure was oc-
casioned by “a mental sickness of a nature which has impaired

446 ee

his judicial effectiveness.” The Referee and the Board specifically
found that the evidence did not support this contention. This con-
clusion was based principally upon Anderson’s own testimony
regarding each individual case and the reasons he advanced for
the failure to promptly decide the matter.

Also during this period Judge Anderson continued to certify
his compliance with Minn. St. 546.27 by endorsement of his pay
vouchers from the state. Additionally, he failed to comply with
certain informational requests submitted to him by the state
court administrator. Also, in two cases he entered contradictory
orders, which were subsequently corrected.

The Board found that since May 17, 1976, respondent had kept
a log of all matters heard or tried before him. The log reflected
that all matters heard by respondent from May 17, 1976, to the
end of the proceedings before the Board were the subject of
prompt disposition.

Finally, the Board found that while Judge Anderson was under
medical care for an emotional problem both before and during
these proceedings, he had not in the past suffered, nor was he
presently suffering, from any disability within the definition
of Minn. St. 490.16, subd. 3, i. e.,

“disability that seriously interferes with the performance of
his duties and is or is likely to become permanent * * *,”

It appears additionally that Judge Anderson has been able
to resolve his emotional difficulties.

The Board concluded that Judge Anderson had consistently
failed to perform his duties and had engaged in conduct preju-
dicial to the administration of justice, bringing the judicial office
into disrepute, within the purview of Minn. St. 490.16. It recom-
mended that Judge Anderson be publicly censured and suspended
without pay for 8 months or, in the alternative, that he be re-
‘moved from office.”

2 Initially, the Board recommended only suspension and censure. In
Judge Anderson’s petition for modification, he specifically questioned
the authority of the court to suspend a judge in proceedings such as

a AAT

The conduct of respondent which is the subject of scrutiny in
these proceedings is judicial conduct of a most serious nature.
The loans between Judge Anderson and members of the bar in
direct contravention of Canon 5C(4) of the Code of Judicial Con-
duct deserve severe and explicit censure. The failure to file the
requested informational reports constitutes a violation of Canon
8B(1) as well as the statutory requirement of Minn. St. 480.17.
The failure to promptly decide matters submitted violates Canon
8A(5) and Minn. St. 546.27. Conceding the facts as found, Judge
Anderson urges that we are not empowered by statute to impose
the sanction of suspension proposed by the Board but must either
censure or remove him. Of these two alternatives, he contends
that only censure is warranted upon the facts.

Minn. Const. art. 6, § 9, vests in the legislature the power to
provide for the removal or discipline of all judges:

“The legislature may provide by law for retirement of all
judges and for the extension of the term of any judge who be-
comes eligible for retirement within three years after expiration
of the term for which he is selected. The legislature may also pro-
vide for the retirement, removal or other discipline of any judge
who is disabled, incompetent or guilty of conduct prejudicial to
the administration of justice.”

Exercising that power, the legislature has enacted Minn. St.
490.15, which creates the Board on Judicial Standards, and Minn.
St. 490.16, which defines its powers. The latter statute provides
in subd. 3:

“On recommendation of the board on judicial standards, the
supreme court may retire a judge for disability that seriously
interferes with the performance of his duties and is or is likely
to become permanent, and censure or remove a judge for action
or inaction occurring not more than four years prior to such ac-

these. Thereafter, the Board filed an alternate recommendation for re-
moval in the event it was determined the suspension was not an avail-
able sanction.

448 Le

tion being reported to the board on judicial standards that may
constitute persistent failure to perform his duties, habitual in-
temperance or conduct prejudicial to the administration of
justice that brings the judicial office into disrepute.”

A literal reading of the statute supports Judge Anderson’s
position. However, keeping in mind the broad language of the
constitutional authorization for this legislation, and considering
the objective sought by the legislature of providing a plenary
system of judicial discipline which is capable of dealing appro-
priately with all cases that might arise in any varied factual con-
text, we feel that the grant of absolute power to remove from
office implicitly gives us the power to impose lesser sanctions
short of removal, in the absence of specific indication to the con-
trary by the legislature.

Suspension is an acceptable sanction in this case and at this
time. Removal, the more severe disposition, would preclude Judge
Anderson from ever again holding judicial office. See, Minn. St.
490.16, subd. 4. The fact that suspension shifts additional work
to other judges is a problem which should be considered when
the present law is next reviewed by the legislature.

For these reasons we have concluded that we are justified in
accepting the Board’s recommendation of suspension without
pay. In so deciding, we are not unmindful of the prohibition of
Minn. Const. art. 6, § 5, which provides that the compensation
of judges prescribed by the legislature shall not be diminished
during their term of office. Nothing we do in any way affects
the amount of compensation prescribed for the office of district
court judge; ‘we hold only that for the period of time Judge
Anderson is suspended from office he is not entitled to receive
the emoluments of that office. The office of district court judge
is constitutionally created, as is the manner in which compensa-
tion of such judges is determined. Of equal constitutional stature
is the authority of the legislature to provide for the discipline
of those judges, which includes the power of suspension without
pay. The legislature itself recognized this when it provided for

Es 449

suspension without pay pending the final resolution of criminal
charges brought against any judge. See, Minn. St. 490.16, subd.
2, .

It is therefore ordered that, effective April 1, 1977, and for
a period of 8 calendar months thereafter, Judge Donald E.
Anderson be suspended from office. He shall not be entitled to
receive any salary of that office during such period of suspen-
sion. He is hereby censured for the judicial misconduct detailed
in the opinion.

Suspension without pay for 3 months.

STATE v. GREGORY C. NOLTING.
254 N. W. 2d 340:

April 1, 1977—No. 46685.

450 Ee

Goldberg, Torgerson, Brewer & Kellum and Steven H. Gold-
berg, for appellant.

Warren Spannaus, Attorney General, and Julius E. Gernes,
County Attorney, for respondent.

Considered and decided by the court without oral argument.

KELLY, JUSTICE.

After a trial without a jury defendant was found guilty in dis-
trict court of charges of possessing marijuana in violation of
Minn. St. 152.09, subd. 1(2), and of possessing marijuana with
intent to sell in violation of Minn. St. 152.09, subd. 1(1). The trial
court sentenced defendant on the latter offense to a maximum
term of 5 years in prison but stayed execution of sentence pend-
ing defendant’s appeal. The evidence on which defendant was
convicted was the fruit of a search, pursuant to a warrant, of
a first-class parcel sent to defendant’s address from someone in
Arizona. We conclude that this search comported with defend-
ant’s Fourth Amendment rights and thus affirm the conviction.

On March 9, 1975, Agent Paul Gerber of the Minnesota Bureau
of Criminal Apprehension applied for a warrant authorizing the
search of “[a] first class, Air Mail parcel, wrapped in brown
paper, the sendor shown as 1946 East Helen, 85719, addressed
to William Phelps, c/o Greg Nolting, Apt. 34, 302 W 4th St.,
Winona, Minn. 55987.” The affidavit in support of the applica-
tion stated:

“That your affiant, Paul N. Gerber, is a duly appointed In-
vestigator for the Minnesota Bureau of Criminal Apprehension
assigned to investigations involving violations of the ‘Controlled
Substances’ Act. That on March 6, 1975, Postal Inspector Dar-
rell Reed, Mankato, Minnesota, contacted me and advised that
a package was inbound for Winona, Minnesota from Tucson,
Arizona which postal authorities there suspected to contain con-
trolled substances. I requested that the package be routed in such
a way that I might attempt an inspection under the authority of a
search warrant. The package in question arrived on Saturday,

Dn 451
March 8, 1975 and I was advised that the parcel was found in
the Tucson, Arizona Post Office by Air Mail Clerk George Polen-
ski, who has discovered numerous parcels of this type containing
controlled substances. Your affiant has received similar investi-
gations in the past where postal employees discover these’ parcels
based on their appearance and general handling. Further investi-
gation by Postal Inspector Darrell Reed disclosed that the
address given the sendor is fictitious which is customarily the
case in investigations of this type. That inquiry was made with
Deputy Detective Richard Steeler, Freeborne County Sheriffs
Office, who advised that the addressee, Greg Nolting is known
to him and that he has received information that Greg Nolting
is involved in the illicit handling of controlled substances and
based on these aforementioned grounds your affiant has reason
to believe and does believe that the package in question contains
that which offends the law.”

On the basis of this affidavit a search warrant was issued by
a district court judge other than the trial judge. Officers execut-
ing the warrant found six compressed bricks of marijuana in
the package.

A controlled delivery was made to defendant the following day,
and a search, also pursuant to warrant, was thereafter made of
defendant’s apartment. Defendant was arrested and confessed
his guilt. The admissibility of the evidence found in the search
and of defendant’s confession depend entirely on whether the
search of the package was proper under the Fourth Amend-
ment. Wong Sun v. United States, 871 U. S. 471, 83 S. Ct. 407,
9L, ed. 2d 441 (1963). The trial court ruled that the search was
legal. . :

The United States Supreme Court has established standards
to gauge the sufficiency of an affidavit offered in support of a
search-warrant application. Aguilar v. Texas, 378 U. S. 108, 84
S. Ct. 1509, 12 L. ed. 2d 723 (1964); Spinelli v. United States,
393 U. S. 410, 89 S. Ct. 584, 21 L, ed. 2d 687 (1969); United
States v. Harris, 403 U. S, 573, 91 S. Ct. 2075, 29 L. ed. 2d 728

452 Ee

(1971). Hearsay information contained in an affidavit must
satisfy a two-pronged test originally advanced in Aguilar and
expressed in State v. LaBarre, 292 Minn. 228, 235, 195 N. W. 2d
435, 440 (1972): “* * * [T]he affidavit [must contain] the
underlying facts and circumstances to enable the magistrate to
independently judge (1) that the informant obtained his knowl-
edge of the reported criminal activity in a reliable manner; and
(2) that the officer-affiant had a sufficient basis to believe that
the informant was ‘credible’ or his information ‘reliable.’ ” Both
prongs of the Aguilar test are met here with respect to the in-
formation supplied by the mail clerk in Tucson, who originally
stopped the package.1 Defendant contends, however, that the
affidavit failed to set forth sufficient facts to enable a magis-
trate to make an independent determination that probable cause
existed.

The prime function of the warrant requirement is the inter-
position of a judicial officer between a police officer and the
object of his investigation. The design of this structure is to re-
quire an independent assessment of the inferences to be drawn

- from the available evidence and thereby to secure the people from
unreasonable searches and seizures. The United States. Supreme
Court noted in Aguilar: :

“An evaluation of the constitutionality of a search warrant
should begin with the rule that ‘the informed and deliberate
determinations of magistrates empowered to issue warrants
* * * are to be preferred over the hurried action of officers

1It is evident from the affidavit that the mail clerk learned of the
package’s type by personally observing it. Personal observation is a
reliable manner of obtaining information. E. g., United States v. Cutts,
535 F. 2d 1083 (8 Cir. 1976). Nor does defendant give us reason. to doubt
the credibility of the mail clerk, an “ordinary citizen,” who is identified
in the affidavit and who was reporting information within the scope
of his government employment. E. g., State v. Cox, 294 Minn. 252, 254,
note 1, 200 N. W. 2d 305, 307 (1972); People v. Glaubman, 175 Colo. 41,
485 P. 2d 711 (1971). See, United States v. Harris, 403 U. S. 573, 599, 91
S. Ct. 2075, 2089, 29 L. ed. 2d 723, 743 (1971) (dissenting opinion).

as 453

* * * who may happen to make arrests.’ * * * The reasons
for this rule go to the foundations of the Fourth Amendment.
* * * ‘The point of the Fourth Amendment, which often is not
grasped by zealous officers, is not that it denies law enforce-
ment the support of the usual inferences which reasonable men
draw from evidence. Its protection consists in requiring that
those inferences be drawn by a neutral and detached magistrate
instead of being judged by the officer engaged in the often com-
petitive enterprise of ferreting out crime.’” 378 U. S. 110, 84
8. Ct. 1512, 12 L. ed. 2d 726.

Accord, United States v. United States District Court, 407 U. S.
297, 816, 92 S, Ct. 2125, 2186, 32 L. ed. 2d 752, 765 (1972). We
bear in mind the function of the magistrate when we examine
the affidavit before us, but we also heed other words from that
passage in Aguilar: “[W]hen a search is based upon a magis-
trate’s, rather than a police officer’s, determination of probable
cause, the reviewing courts will accept evidence of a less ‘judicial-
ly competent or persuasive character than would have justified
an officer in acting on his own without a warrant * * *.’” 378
U.S. 111, 84S. Ct. 1512, 12 L. ed. 2d 726.

The affidavit in question is characterized as conclusory in so
far as it asserts the package was similar to others without de-
lineating the similarities. It relates that the mail clerk “has dis-
covered numerous parcels of this type containing controlled sub-
stances.” Viewing the affidavit in a commonsense fashion rather
than regarding it as a pleading,? the meaning conveyed by “par-
cels of this type” is that the package in question looked like other
packages that contained controlled substances. While this state-
ment is conclusory in form, we think it does not usurp the magis-
trate’s function in this case. All statements regarding the
sensible world are conclusory to some extent, since in stating
something about the world one draws inferences from sensory

2 United States v. Ventresea, 380 U. 8. 102, 108, 85 S. Ct, 741, 746, 13 L.
ed. 2d 684, 689 (1965); State v. Wiley, 295 Minn. 411, 417, 205 N. W. 2d
667, 673 (1973). :

454 |

impressions. Thus, the mere form of the affidavit is unobjec-
tionable. Instead, the particular conclusion must be examined.
The conclusion drawn by the mail clerk is a simple one, drawn
directly from his personal sensory experience. It is the kind of
conclusion that courts and juries may legitimately credit in
resolving factual questions. Moreover, the mail clerk may be
said to be something of an expert with respect to parcels and
their appearance. As indicated in the affidavit, in the past he
had been able to select those packages that appeared suspicious.
Apparently this method is fairly common. Thus, he had the ex-
perience, if such was necessary, to remark on the similarity of
the packages. If the affidavit had set forth the respects in which
the parcel resembled the earlier packages,* the magistrate might

3 For example, a witness may identify a suspect even though he can
not recall the specific features of his face or person, State v. Sutton, 272
Minn. 399, 188 N. W. 2d 46 (1965); or testify that an individual stag-
gered and slurred his speech to show intoxication, State v. Hicks, 301
Minn. 350, 222 N. W. 2d 345-(1974); or testify as to the speed of an auto-
mobile, Daugherty v. May Brothers Co. 265 Minn. 310, 121 N. W. 2d 594
(1963); or testify as to the mental condition of testator, In re Estate of
Jenks, 291 Minn. 138, 189 N. W. 2d 695 (1971). See, also, Rule 701, Fed-
eral Rules of Evidence. These examples are weighty here, since they
are admissible evidence, while evidence cognizable in a probable cause
determination need not be admissible in a trial. E. g., United States v.
Ventresca, 380 U. S. 102, 107, 85 S. Ct. 741, 745, 13 L. ed. 2d 684, 688
(1965).

4 At a hearing before the trial court, the similarities between the
parcels were identified. They included the same type of felt-pen hand-
writing on the packages, use of $1 Eugene O’Neill commemorative
stamps, identically sized boxes, and similar wrapping. Since this in-
formation was not presented to the judge issuing the warrant, it is im-
material to the determination of whether probable cause existed which
would justify issuance of a warrant. Whiteley v. Warden, Wyo. State
Penitentiary, 401 U. S. 560, 565, note 8, 91 S. Ct. 1031, 1035, 28 L. ed. 2d 306,
311 (1971). See, Stone v. Powell, 428 U. S. 465, 473, 96 S. Ct. 3037, 3041,
note 3, 49 L, ed..2d 1069, 1075. (1976); and 428 U. S. 531, 96 S. Ct. 3069, 49
L. ed. 2d 1110 (dissenting opinion). " ” ‘

[| 455
have been more certain of the clerk’s conclusion. But we think
detailing the basis of this conclusion, while desirable, goes to its
probative value to establish probable cause and not to whether
the conclusion can be considered by a magistrate. A magistrate
would still have inferences to assess if some weight was given
this conclusion.®

Although it is a close question, the affidavit advances suf-
ficient facts to establish probable cause. The statement that the
package had a fictitious return address bolsters the inference
to be drawn from the mail clerk’s conclusion (and indirectly the
conclusion itself). The reputation of the defendant should also
be given some weight even though his reputation with a county
sheriff’s office for involvement in the illicit handling of con-
trolled substances standing alone would not be sufficient to
establish probable cause. Nathanson v. United States, 290 U. S.
41, 54S. Ct. 11, 78 L. ed. 159 (1933). However, where it is sup-
ported by other information, it may result in establishing prob-
able cause. In United States v. Harris, 408 U. S. 578, 588, 91
S. Ct. 2075, 2081, 29 L. ed. 2d 728, 783 (1971), Mr. Chief Justice
Burger said:

“We cannot conclude that a policeman’s knowledge of a sus-
pect’s reputation—something that policemen frequently know
and a factor that impressed such a ‘legal technician’ as Mr.
Justice Frankfurter—is not a ‘practical consideration of every-
day life’ upon which an officer (or a magistrate) may properly
rely in assessing the reliability of an informant’s tip. To the ex-
tent'that Spinelli prohibits the use of such probative informa-
tion, it has no support in our prior cases, logic, or experience and
we decline to apply it to preclude a magistrate from relying on
a law enforcement officer’s knowledge of a suspect’s reputation.”

5 The conclusions in the affidavit or complaint concerned the ultimate
issue of the existence of probable cause in Aguilar v. Texas, 378 U. S.
108, 84 S. Ct. 1509, 12 L. ed. 2d 723 (1964); Giordenello v. United States,
857 U. S. 480, 78 S. Ct. 1245, 2 L, ed. 2d 1503 (1958); and Nathanson v.
United States, 290 U. S. 41, 54 S. Ct. 11, 78 L. ed. 159 (1933).

456 Ee

Although in Harris the use of the defendant’s reputation was
said to be permissible in assessing the reliability of an inform-
ant’s tip, there is no logical reason for not permitting the use
of such probative information in establishing probable cause.°

When viewed together, the detection of the package by the mail
clerk, the clerk’s erroneous statement that the return address
was fictitious, and the reputation evidence provide reasonable
grounds for the belief that the package contained a controlled
substance. A necessary element in our finding is that the officer
procured a warrant from a judicial officer before searching the
package.” Therefore, the affidavit was facially sufficient to
establish probable cause.

6 It is difficult to determine from the decision in Harris the number
of justices who joined in the use of the reputation evidence. Thus, Mr.
Justice Stewart joined in Part I of the plurality opinion which con-
tained a reference to the affiant officer’s knowledge of the defendant's
background. Mr. Justice White concluded that the affidavit as a whole
supported probable cause. It might be argued that because the affidavit
contained reputation evidence, he may have given that facet of it some
weight. However, neither Mr. Justice Stewart nor Mr. Justice White
specifically concurred in Part II of the opinion which embodied the dis-
cussion of reputation evidence, among other things. Thus, three mem-
bers of the court concurred in the plurality opinion generally, and two
arguably concurred as to the use of reputation evidence.

7The securing of a warrant may tip the scales in doubtful cases.
United States v. Ventresca, 380 U. S. 102, 109, 85 S, Ct. 741, 746, 13 L. ed.
2d 684, 689 (1965); Aguilar v. Texas, 378 U. S. 108, 111, 84 S, Ct. 1509, 1512,
12 L, ed. 2d 723, 726 (1964). The reason for this result is the desire not
to deter police officers from obtaining warrants.

Another ground for this result may lie in the characterization of the
exclusionary rule as being directed at police misconduct. E. g., United
States v. Calandra, 414 U. S. 338, 347, 94 S. Ct. 613, 619, 38 L. ed. 2d 561,
571 (1974). Little more can be expected of a police officer who gathers
evidence, presents it to a magistrate, and receives a warrant. Stone v.
Powell, 428 U. S. 465, 496, 96 S. Ct. 3037, 3053, 49 L. ed. 2d 1067, 1090
(1976) (Burger, C. J., concurring). If Fourth Amendment rights are vio-
lated by the resulting search, the fault lies in large part with the judici-
ary since refusal to issue the warrant presumably would compel the
officer to gather more evidence before a search was conducted. In the

Le 457.

We cannot help but remark on the facts of United States v.
Van Leeuwen, 397 U. S. 249, 90 S. Ct. 1029, 25 L. ed. 2d 282
(1970), even though the decision does not directly support our
conclusion. There, the defendant mailed two 12-pound packages
at a post office in Washington some 60 miles from the Canadian

present case such evidence was apparently available, See footnote 4,
supra. Because judges may disagree about the existence of probable
cause, it is difficult to fault an officer in close cases for not realizing
that his investigation has not yet yielded probable cause. Stone v.
Powell, 428 U. S. 465, 589, 96 S. Ct. 3087, 3073, 49 L. ed. 2d 1067, 1114
(White, J., dissenting). A police officer’s reliance is especially justified
where, as here, a judge of long experience deems the affidavit suf-
ficient. Application of the exclusionary rule in such a context would
do little to deter police misconduct. But cf. United States v. Karathanos,
581 F. 2d 26, 32 (2 Cir. 1976), certiorari denied, 428 U. S. 910, 96 S. Ct.
8221, 49 L. ed. 2d 1217 (1976) (rejecting government suggestion that ex-
elusionary rule should not apply if officers obtain a warrant).

We note that recently the United States Supreme Court has ex-
pressed some disenchantment with the exclusionary rule. Mr. Justice
White observed in his dissent in Stone v. Powell, supra: “I feel con-
strained to say, however, that I would join four or more other Justices
in substantially limiting the reach of the exclusionary rule as presently
administered under the Fourth Amendment in federal and state crimi-
nal trials.

ee KE

“The rule has been much criticized and suggestions have been made
that it should be wholly abolished, but I would overrule neither Weeks
v. United States nor Mapp v. Ohio. I am nevertheless of the view that
the rule should be substantially modified so as to prevent its applica-
tion in those many circumstances where the evidence at issue was
seized by an officer acting in the good-faith belief that his conduct com-
ported with existing law and having reasonable grounds for this belief.
‘These are recurring situations; and recurringly evidence is excluded
without any realistic expectation that its exclusion will contribute in
the slightest to the purposes of the rule, even though the trial will be
seriously affected or the indictment dismissed.” 428 U. S. 587, 96 S. Ct.
8072, 49 L. ed. 2d 1113. Nevertheless, until the United States Supreme
Court modifies or abrogates the exclusionary rule, we must, under
Mapp Vv. Ohio, 367 U. S. 643, 81 S. Ct. 1684, 6 L. ed. 2d 1081 (1961), give
it full force and effect in this court.

458

border. He declared their contents were coins. One package was
addressed to a post office box in Van Nuys, California; the other,
to a post office box in Nashville, Tennessee. The postal clerk in-
formed a police officer who was present that he was suspicious
about the packages. The officer noticed that the return address
on the packages was a vacant housing area of a nearby junior
college and that the defendant’s car displayed British Columbia
license plates. The customs bureau in Seattle was notified, and at
8 o’clock that afternoon, an hour and a half after the package
was mailed, it learned that the addressee of one package was
under investigation in Van Nuys for trafficking in illegal coins.
The next morning Seattle customs learned from Nashville au-
thorities that the second addressee was also being investigated
for the same crime. Thereupon, a customs official applied for
and received a warrant; the packages were opened, inspected, re-
sealed, and returned to the mails. The court was faced with the
question of whether detention of the first-class packages until
a warrant was obtained violated the Fourth Amendment. Mr.
Justice Douglas, writing for a unanimous court, found the deten-
tion in these circumstances constitutional:

“* * * Yet even first-class mail is not beyond the reach of
all inspection; and the sole question here is whether the condi-
tions for its detention and inspection had been satisfied. We
think they had been.

“The nature and weight of the packages, the fictitious return
address, and the British Columbia license plates of respondent
who made the mailings in this border town certainly justified
detention, without a warrant, while an investigation was made.
The ‘protective search for weapons’ of a suspect which the Court
approved in Terry v. Ohio, 392 U. S, 1, 20-27, even when prob-
able cause for an arrest did not exist, went further than we need
go here. The only thing done here on the basis of suspicion was
detention of the packages. There was at that point no possible
invasion of the right ‘to be secure’ in the ‘persons, houses, papers,
and effects’ protected by the Fourth Amendment against ‘unrea-

a 459

sonable searches and seizures.’ Theoretically—and it is theory
only that respondent has on his side—detention of mail could at
some point become an unreasonable seizure of ‘papers’ or ‘effects’
within the meaning of the Fourth Amendment. Detention for
11/2 hours—from 1:30 p. m. to 3 p. m.—for an investigation cer-
tainly was not excessive; and at the end of that time probable
cause existed for believing that the California package was part
of an illicit project. A warrant could have been obtained that day
for the one package; yet the mystery of the other package re-
mained unsolved and federal officials in Tennessee could not be
reached because of the time differential. The next morning they
were reached and it was learned that the second package was also
probably part of an illicit project. * * *

“No interest protected by the Fourth Amendment was invaded
by forwarding the packages the following day rather than the
day when they were deposited. The significant Fourth Amend-
ment interest was in the privacy of this first-class mail; and that
privacy was not disturbed or invaded until the approval of the
magistrate was obtained.” (Italics supplied.) 397 U. S. 252, 90
S. Ct. 1082, 25 L. ed. 2d 285.

In sustaining Van Leeuwen’s conviction for illegally importing
gold coins, the court did not pass on the sufficiency of the war-
rant authorizing search of the packages. Nevertheless, in dictum
the Court did suggest that the customs officials had probable
cause and could have obtained a warrant upon learning that the
addressee in Van Nuys was under investigation for trafficking
in illegal coins. This dictum, in view of the remarkable factual
similarity between the cases, confirms our conclusion that prob-
able cause existed in the instant case.

We should comment on the fact that the search-warrant af-
fidavit contained a material misstatement of fact since in actuali-
ty the return address on the package was not fictitious. When
the mail clerk noted the parcel’s similarity to the other packages,
he alerted the United States postal inspectors in Tucson. One of
the inspectors had a clerk check the return address of the pack-

460 ee
age, and she reported that there was no: such address. The
address she checked, however, was different from’ the return
address on the package. This erroneous information was then
transmitted to Agent Gerber. Defendant argues that the mis-
statement was reckless and therefore, since the misstatement
was necessary to establish probable cause, the error requires
invalidation of the warrant.and the resulting search under the
test advanced in United States v. Carmichael, 489 F. 2d 983 (7
Cir. 1978).

In State v. Luciow, 308 Minn. 6, 240 N. W. 2d 833 (1976), this
court held that the defendant’s prima-facie showing of material
misrepresentation entitled him to challenge the validity of a
facially sufficient affidavit at the omnibus hearing sanctioned
by Rule 11, Rules of Criminal Procedure. But we did not establish
a standard delineating the conditions under which inaccuracies
in the supporting affidavits would vitiate a search warrant.

In anticipation of our decision in Luciow, the trial court con-
ducted a hearing with respect to the misstatement in the af-
fidavit. It found that the error was due to negligence in the of-
fice of the postal inspectors. We concur in this assessment. Negli-
gent misrepresentation is thus attributable only to the postal
employees and not to Agent Gerber, who submitted the affidavit.

Carmichael and its progeny examine the state of mind only
of the “government agents whose affidavits or testimony are be-
fore the magistrate.” 489 F. 2d 989. Accord, Mapp v. Warden,
N. Y. State Correctional Institution, 581 F. 2d 1167, 1172 (2 Cir.
1976). The rationale for this result is that the Aguilar test ade-
quately ensures the reliability of hearsay information. 489 F.
2d 989. We agree that in this case it is the state of mind of Agent
Gerber that is material to the validity of the warrant. Since he
had reason to rely on the trustworthiness of the mistaken in-
formation, he was innocent in stating that the package’s return
address was fictitious. An innocent misrepresentation of a ma-
terial fact does not vitiate probable cause. “* * * [I]f the of-
ficer reasonably believes facts which facially indicate a crime

[| 461

has been committed, then even if mistaken, he has probable cause
for believing a crime had been committed.” United: States v.
Marihart, 492 F. 2d 897, 900, note 4 (8 Cir.), certiorari denied,
419 U. S. 827, 95 8. Ct. 46, 42 L. ed. 2d 51 (1974). Accord, United
States v. Carmichael, supra; United States v. Lee, 540 F. 2d 1205
(4 Cir.), certiorari denied, 429 U. S. 894, 97 S. Ct. 255, 50 L. ed.
2d 177 (1976); United States v. Luna, 525 F. 2d 4 (6 Cir. 1975),
certiorari denied, 424 U. S. 965, 96 S. Ct. 1459, 47 L. ed. 2d 732
(1976) ; State v. Goodlow, 11 Wash. App. 533, 523 P. 2d 1204
(1974). But see, United States v. Thomas, 489 F. 2d 664 (5 Cir.
1978) ; State v. Boyd, 224 N. W. 2d 609 (Iowa 1974). Therefore,
defendant’s conviction must be affirmed.
Affirmed.

a
STATE v. JOHN RICHARD KRECH.
252 N. W. 2d 269.

April 1, 1977—No. 47038.

462 |

John O. Sonsteng, County Attorney, and Thomas F. Van Horn,
Assistant County Attorney, for appellant.
Ogurak Law Offices and David A, Fuith, for respondent.

Heard before Rogosheske, Todd, and Yetka, JJ., and con-
sidered and decided by the court en bane.

YETKA, JUSTICE.

The State of Minnesota appeals from an order of the district
court granting defendant’s motion to dismiss charges of ag-
gravated assault and obstructing legal process or arrest on the
grounds that defendant’s prior plea of guilty in county court to
petty misdemeanor and misdemeanor offenses precluded prosecu-
tion in district court under Minn. St. 609.035 because all of the
offenses arose out of a single behavioral incident. This appeal
is taken pursuant to Rule 29.03, subd. 1(1), Rules of Criminal
Procedure. We affirm.

This appeal presents two issues:

(1) Whether on the facts and circumstances of this case the
offenses charged against defendant arose out of a single be-
havioral incident.

(2) Whether Minn. St. 609.035 bars prosecution for felony
and gross misdemeanor charges in district court when defendant
has already been convicted upon a plea of guilty to petty misde-
meanor and misdemeanor charges in county court arising out
of the same behavioral incident when severance of the charges
is made by the prosecution.

1Rule 29.03, subd. 1, Rules of Criminal Procedure provides: “The
prosecuting authority may appeal to the Supreme Court:

1. in any felony or gross misdemeanor case, as of right, from any
pretrial order of the district court, and

2. in any misdemeanor case, only with permission of the Supreme
Court, any adverse decision of the district court acting pursuant to Rule
28.07, subd. 4, or any pretrial order of the district court upon a trial de
novo.
except an order dismissing a complaint for lack of probable cause to
believe the defendant has committed an offense or an order dismissing
a complaint pursuant to Minn. Stat. § 631.21.” (Italics supplied.)

I 463

On January 9, 1976, at approximately 2:16 a. m., the Apple
Valley police department received a call from a woman that de-
fendant, John Richard Krech, who appeared to her to be intoxi-
cated, had just walked into her home in Apple Valley and asked
for assistance with his car. The woman’s husband went out to
help defendant. Because her husband was still with defendant,
she asked the police to wait until defendant left before investigat-
ing.

Approximately 10 minutes later, two Apple Valley police of-
ficers arrived in their squad cars and waited nearby at 160th
Street and Cedar Avenue. When defendant left, the officers fol-
lowed the vehicle on 160th Street. As they did, defendant’s
vehicle was traveling at speeds over 80 miles per hour.

After defendant turned right on Crystal Lake Road, the of-
ficers attempted to stop him by turning on the red lights of their
squad car, Rather than stopping, however, defendant accelerated.
Still following the vehicle, the officers observed it fail to stop
for a stop sign and swerve, momentarily, out of control on three
occasions.

Finally, at a dead end, the officers attempted to prevent any
further movement by defendant by positioning a squad car on
each side of the road. One officer then exited his vehicle with
his gun drawn. Defendant, who had “fish-tailed” his vehicle into
a position facing head-on with the squad cars, suddenly ac-
celerated it toward the officer. The second officer stopped de-
fendant’s vehicle by ramming it with his car and forced it away
from the officer on foot. The second officer then exited his car,
approached defendant’s vehicle, and grabbed the handle of the
driver’s door. Defendant accelerated again, drove over an em-
bankment and down a hill, and came to a stop in a snow bank.

Defendant was placed under arrest for speeding, failure to
stop for a stop sign, driving after revocation of his license, driv-
ing while under the influence of an alcoholic beverage, driving
with a blood alcoholic content over .10 percent, and reckless
driving. On the same date, a formal complaint was filed against

464 Ee

defendant charging him with aggravated assault and obstructing
legal process.

On January 9, 1976, defendant appeared in county court on
all the charges. He was ordered to appear on the felony and gross
misdemeanor charges in district court on February 2, 1976.

In county court on January 29, 1976, defendant entered a plea
of not guilty to the traffic charges. Several days later, on Febru-
ary 2, 1976, an omnibus hearing was held in district court. A
finding of probable cause was made on February 23, 1976, on
the aggravated-assault and obstructing-legal-process charges, and
a plea of not guilty was entered on defendant’s behalf.

Two days later, on February 25, 1976, defendant pled guilty
to the traffic charges in county court and was sentenced to 60
days in jail. The sentence was suspended on the condition that
defendant be on probation for 1 year and obtain in-patient
alcohol treatment.

Thereafter, on April 26, 1976, defendant moved the district
court for an order dismissing the aggravated-assault and ob-
structing-legal-process charges on the basis of Minn. St. 609.035.
On July 13, 1976, the district court granted defendant’s motion.

IH The first issue presented is whether the charges against
defendant arose out of a single behavioral incident and are thus
governed by Minn. St. 609.035, which provides:

«x * * if a person’s conduct constitutes more than one offense
under the laws of this state he may be punished for only one of
such offenses and a conviction or acquittal of any one of them
is a bar to prosecution for any other of them. All such offenses
may be included in one prosecution which shall be stated in
separate counts.”’?

2An “offense” under § 609.035 includes all violations of municipal
ordinances which might result in the penalty of incarceration. State v.
White, 300 Minn. 99, 219 N. W. 2d 89 (1974). The petty misdemeanors
charged against defendant would not constitute “offenses” within the
meaning of this section, Minn. St. 609.02, subd. 4a.

be 465

The purpose of the statute is to protect against exaggerating
the criminality of a person’s conduct and to make both punish-
ment and prosecution commensurate with culpability. See, State
v. Johnson, 273 Minn, 394, 141 N. W. 2d 517 (1966). The statute
contains two protections. The first is protection against multiple
punishment. This is designed to ensure punishment will be com-
mensurate with culpability. The second is protection against
serialized prosecution. This protects the defendant from harass-
ment by repeated prosecution for the same conduct until a de-
sired result is reached.

The invocation of both protections depends on the same
determination—whether the conduct underlying the multiple of-
fenses was unitary or divisible. The tests to be applied were
enunicated in State v. Johnson, supra. It sets forth one test for
crimes in which criminal intent is an essential element and one
for crimes in which criminal intent is not an essential element,
such as traffic offenses:

“Upon a consideration of the indications of legislative intent
as analyzed above, we are confronted with formulating a work-
able test for determining the scope of application of the protec-
tions contemplated by the statute. It is no easy task. While the
objectives are clear enough, the difficulty lies in formulating a
test for determining whether each violation charged resulted
from a single behavioral incident. Although the case before us,
because of the facts, poses no particular problem, any test must
give consideration to the vast number of conceivable situations
which are likely to arise. The cases from other jurisdictions and
comments of the advisory committee suggest that, apart from
the factors of time and place, the essential ingredient of any test
is whether the segment of conduct involved was motivated by
an effort to obtain a single criminal objective. The problem that
immediately arises is that this test is phrased in terms of intent,
and a characteristic unique to traffic offenses is that intent is
not an essential element of the offense, Thus, the test for offenses
such as we are faced with in the instant case must necessarily

466

include some substitution for the factors of intent and objective.
Where intent is not a factor, it is the singleness of the conduct
or behavioral incident itself that must be given the most signifi-
cance. Subject to the refinements the multitude of possible fact
situations may require, it would seem that violations of two or
more traffic statutes result. from a single behavioral incident
where they occur at substantially the same time and place and
arise out of a continuous and uninterrupted course of conduct,
manifesting an indivisible state of mind or coincident errors
of judgment. Under these circumstances, there exists a substan-
tial relationship between the conduct constituting the violations,
and the statute prohibits both double punishment and serialized
prosecutions.” 273 Minn. 404, 141 N. W. 2d 524.

The presence or absence of a single behavioral incident depends
on the facts and circumstances of each case. State v. Reiland, 274
Minn. 121, 128, 142 N. W. 2d 635, 637 (1966).

Most cases arising under § 609.085 generally have involved
only traffic offenses* or only violations which require intent.*
Only two other cases to date have involved offenses which in-
volved both an intentional offense and a nonintentional offense.
See, State v. Kooiman, 289 Minn, 439, 185 N. W. 2d 534 (1971)
(nonintentional crime of criminal negligence and intentional
crime of drunkenness) ; State v. Finn, 295 Minn. 520, 203 N. W.
2d 114 (1972) (reckless driving and unauthorized use of a motor

3 See, e. g., State v. Wheat, 296 Minn. 97, 206 N. W. 2d 655 (1973) (driv-
ing without valid license and speeding); State v. Corning, 289 Minn. 382,
184 N. W. 2d 603 (1971) (driving while under the influence and hit and
run); State v. Gladden, 274 Minn. 533, 144 N. W. 2d 779 (1966) (driving
while under the influence and careless driving); State v. Johnson, 273
Minn. 394, 141 N. W. 2d 517 (1966) (driving while under the influence
and driving over the centerline).

4 See, e. g., State v. Prudhomme, 303 Minn. 376, 228 N. W. 2d 243 (1975)
(rape, indecent liberties, and assault); State v. Shevchuk, 282 Minn. 182,
163 N. W. 2d 772 (1968) (assault, robbery, and unauthorized use of
motor vehicle); State v. Murphy, 277 Minn. 355, 152 N. W. 2d 507 (1967)
(drunkenness and unauthorized use of motor vehicle).

a 467

vehicle), In each case the court applied the test for noninten-
tional offenses if a traffic offense was part of the behavioral
incident, and required that the offenses “arise out of a continu-
ous and uninterrupted course of conduct, manifesting an indivi-
sible state of mind or coincident errors of judgment.” 289 Minn.
443, 185 N. W. 2d 536.

Applying this test to the present facts, it appears that the
charges against defendant were the result of a single behavioral
incident. The offenses were the result of a continuous course of
conduct, They arose at substantially the same time and place.
See, State v. Finn, supra. Also, it seems apparent that defend-
ant’s state of mind evidenced an indivisible purpose devoted to
successfully avoiding the police officers. Thus, § 609.035 applies.

I The county courts have jurisdiction over petty mis-
demeanors and misdemeanor offenses. Minn. St. 487.18.5 Under
Rule 16, Rules of Criminal Procedure,* the district court has
jurisdiction over misdemeanors when joined with a felony prose-
eution.

The petty misdemeanor and misdemeanor charges were
brought against defendant in county court while the gross misde-
meanor and felony charges were brought against defendant in

5 Minn. St. 487.18 provides: “(a) The county court has jurisdiction
to hear, try and determine any charge of violation of

“(1) a criminal law of this state constituting a misdemeanor com-
mitted within the county court district; of

“(2) any ordinance, charter provision, rule or regulation of any sub-
division of government in the county court district.

“(b) The county court has jurisdiction to conduct preliminary hear-
ings and to exercise all judicial powers incident to preliminary hear-
ing proceedings on the charge of violation of any criminal law com-
mitted within the county court district.

“(e) The county court has jurisdiction to hear, try and determine
any matter constituting a petty misdemeanor.”

6 Rule 16, Rules of Criminal Procedure, provides: “The district court
shall try any misdemeanor offense prosecuted by indictment or which
is joined with a felony prosecution pursuant to Minn. Stat. § 609.035.
Any such prosecutions shall be governed by these rules.”

468° —

district court. This choice was made by the prosecution. After
defendant pled guilty and was sentenced to the charges in county
court, the district court dismissed the charges pending before
it on the basis of § 609.035. On appeal the state contends de-
fendant has merely taken advantage of a procedural defect in
the county court system and as a result § 609.085 should not be
applied to the pending district court matters.

If the prosecution has a problem in this case, it was of its own
making. We made it clear in State v. Reiland, 274 Minn, 121, 127,
142 N. W. 2d 635, 639 (1966), that if the state wishes to charge
a defendant with more than one offense—one or more a misde-
meanor and one or more a felony—it should be done in one prose-
cution in district court stating each offense as a separate count:

“Finally, we allude to what was said in Johnson—that the
problem presented in the case before us could not arise if both
of the offenses were included in one prosecution stating each as
separate counts, a procedure expressly authorized by the statute.
Minn. St. 630.23, rendering indictments charging more than one
offense demurrable, makes an exception ‘in cases where it is al-
lowed by statute.’ It is true that misdemeanor cases are not usual-
ly initiated in district court. However, the court does have
original jurisdiction and its exclusive jurisdiction is invoked by
including the felony charge. Though the problem was not pre-
sented or briefed, it would seem that if all offenses were charged
as counts, the prosecution could proceed in district court to a de-
termination of the question of guilt of each offense in the same
manner as is accomplished where the prosecution is for offenses
comprising different degrees. Section 628.14 expressly author-
izes included offenses to be charged as counts, and it is not un-
common for one of the lesser degrees charged, or at least sub-
mitted for determination upon trial, to be a misdemeanor.”

Thus, this case was clearly a prosecutor’s error. Both complaints
were drawn the same day and were known to the prosecution.
Nevertheless it chose to proceed with dual prosecutions—one in
each court.

a 469

Our result in this case might be different if the prosecution
had not been aware of the dual charges and if the defense had-
not advised the county court of the effect of the acceptance of
the guilty plea under that set of conditions.

Affirmed.
LP

KEVIN MYERS, A MINOR, BY NORMAN MYERS
AND ANOTHER, HIS PARENTS AND NATURAL
GUARDIANS, v. FECKER COMPANY AND ANOTHER.

252 N. W. 2d 595.

April 1, 1977—No. 46735.

: Le
Willette, Kraft, Walser & Nelson, Paul A. Nelson, and Molter,
Runchey & Louawagie, for appellants.

470 es

Lasley, Gaughan, Reid & Stich and John F. Angell, for re-
spondents.

Heard before Yetka, Scott, and Winton, Jd, and considered
and decided by the court en banc.

CRANE WINTON, JUSTICE.*

This is an appeal from an order of the district court denying
a petition to vacate an earlier order approving a settlement on be-
half of a minor and to declare the settlement and releases exe-
cuted in support of it null and void. Because this court agrees
with the district court that petitioners have failed to present suf-
ficient grounds to justify vacating the settlement and avoiding
the releases, the district court order must be affirmed.

On November 4, 1960, Kevin Myers, who was then 28 months
old, was struck by a truck owned by defendant Fecker Company
and driven by defendant Marvin Bahn, and as a consequence he
suffered extensive injuries including a crushed chest, abdomen,
and pelvis, contusions of the left lung, and hemorrhaging in the
area of the loin muscles. From those injuries Dr. John G. Loh-
mann, the attending physician, stated in an affidavit dated May
1, 1961, that Kevin made a “miraculous recovery.” Dr, Lohmann
in the same affidavit further stated that Kevin had no perma-
nent disability but that he had referred the boy to a neurologist
for an evaluation of residual brain damage. In an affidavit dated
April 28, 1961, Dr. G. W. Smith, the neurologist, stated that he
could “identify no specific evidence of neurological residual.”
He did indicate in his affidavit, however, that Kevin’s family
had noted that he had “a tendency to swing the right foot a little
as he gets tired” and that he also “tends to have some soreness
of the right leg, * * * primarily in the right thigh, if he plays
hard.”

In April and May 1961, some 5 months after the date of his
injuries, Kevin’s parents entered settlement negotiations with

* Acting as Justice of the Supreme Court by appointment pursuant
to Minn. Const. art. 6, § 2, and Minn. St. 2.724, subd, 2.

Es 471
representatives of respondents’ automobile insurer. Those discus-
sions resulted in an agreement to accept $5,200 in settlement of
all claims.1 Because Kevin’s parents had not retained counsel to
represent them in the settlement negotiations, the lawyer rep-
resenting respondents and their insurer .retained independent
counsel to represent them in court at the hearing on the petition
for approval of the settlement which was held as required by
Minn, St. 540.08. :

At the hearing both parents affirmed that they realized no
further claims could be made by reason of Kevin’s injuries. The
court then approved the settlement by an order dated May 9,
1961, which authorized and directed Kevin’s parents to accept
$5,200 “in full settlement and release of all claims, demands, ac-
tions and causes of actions, and/or suits of any kind in behalf
of said minor, Kevin Myers, resulting from or in any way con-
nected with the accident referred to.”

Pursuant to the court’s order, Norman and Mary Myers exe-
cuted a release and indemnity agreement, which after the pre-
ambles provided:

“Now THEREFORE, in consideration of the sum of Five Thou-
sand Two Hundred and No/100 ($5,200.00) Dollars, paid to us in
our individual capacities and as parents and natural guardians of
Kevin Myers, a minor, by Fecker Company and Marvin Bahn
and The Lumbermans Mutual Casualty Company of Chicago,
Illinois, in compromise and settlement of said claim and of all
liability of said Fecker Company and Marvin Bahn in connee-
tion with the premises, we, Norman Myers and Mary Myers, in

1 The settlement amount was apportioned as follows:

Medical expense $1,294.65
Travel expense 481.60
Mary Myers’ wages lost in caring for Kevin 680.00
Future medical and travel expense . 73.60
Savings account held in trust for Kevin 2,670.15.

$5,200.00

472 es

our individual capacities and as parents and natural guardians
of Kevin Myers, a minor, do release and forever discharge Fecker
Company and Marvin Bahn and The Lumbermans Mutual Casu-
alty Company of Chicago, Illinois, of and from all claims, de-
mands, actions or causes of action whatsoever including all as
such have been, now are, or hereinafter might be connected with
or based upon injuries sustained by said minor, Kevin Myers,
and/or ourselves, in any act of negligence or otherwise of said
Fecker Company and Marvin Bahn in connection therewith.

“The undersigned Norman Myers and Mary Myers, further de-
clare that the terms of the settlement are fully understood and
voluntarily accepted for the purpose of making full and final
compromise, adjustment and settlement of any and all claims,
disputed or otherwise, on account of injuries, known or unknown,
and damages herein mentioned.

“For the consideration aforesaid, the undersigned hereby
stipulate and agree to hold harmless and indemnify the said re-
leasees from any and all claims and action, which may at any
time hereinafter be made or instituted against them for the pur-
pose of enforcing any claim for or on behalf of said minor for
damages resulting from or in any way arising out of said ac-
cident, including the cost of defense in such action or actions.

“This release is executed by the undersigned in our individual
capacities and intended to cover any and all loss of services and
damage of any kind sustained by us personally and as parents
and natural guardians of Kevin Myers, a minor, pursuant to the
Order of the District Court of Lyon County, dated the 9th day
of May, 1961, made after a petition was filed by the under-
signed with said Court setting forth the injuries and damage and
directing the undersigned to execute said release in accordance
with the terms and conditions set forth in the petition and Order
of this Court.

“Dated this 9th day of May, 1961, at Windom, Minnesota.

“/s/ NORMAN Myers (In my individual capacity and as parent
(father) and natural guardian of Kevin Myers, a minor.)

Es 473

“/s/ MARY Myers (In my individual capacity and as. parent
(mother) and natural guardian of Kevin Myers, a minor.)
“IN PRESENCE OF:
/8/ R. T. RODENBERG
/s/ J. C. WiLTROUT”

They also executed a second release dated May 9, 1961, which
stated:

“We, Norman Myers and Mary Myers, in our individual
capacities and as parents and natural guardians of Kevin Myers,
a minor, in consideration of Five Thousand Two Hundred and
No/100 ($5,200.00) Dollars, receipt of which is hereby acknowl-
edged and pursuant to Order of the District Court dated May
9, 1961, hereby release and forever discharge Fecker Company
and Marvin Bahn from all claims, demands, actions and suits
by reason of any damage, loss or injury known or unknown,
which heretofore has been or hereafter may be sustained by us
or by said minor on account of an accident on or about the 4th
day of November, 1960, at or near North Hiawatha Street, Pipe-
stone, Minnesota. We understand that part of the above con-
sideration is for unknown injuries and damages that may appear
in the future.

“As a further consideration for the above payment we hereby
agree to indemnify and protect from all damage and expense the
said Fecker Company and Marvin Bahn in the event of any claim
by or on behalf of said minor, for injuries or damages arising
or growing out of said accident.

“In WITNESS WHEREOF, We now set our hands this 9th day of
May, 1961.

“/3/ NORMAN MYERS
“/s/ Mary MYERS
“IN PRESENCE OF:
/s/ R. T. RODENBERG
/s/ J. C. WILTROUT”

In her affidavit filed in support of the motion to vacate the
order approving the settlement, Kevin’s stepmother, Faye Myers,

ATA

who had married Kevin’s father on November 1, 1969, testified
that she had not been aware of Kevin’s involvement in an acci-
dent in November 1960. She also testified that when he was in
the eighth grade, she “noticed that he did not pick his feet up
when walking; he tended to drag the feet on the ground as the
step of an old man.” Kevin then, she said, would make an effort
to correct the way he walked. She further stated that in 1971
Kevin complained of hip pain when playing football and received
medical advice to discontinue football that fall. In 1972, Faye
Myers observed that Kevin’s hip was “out of joint and completely
lopsided.” In January 1973, Dr. R. A. Klassen, an orthopedic
surgeon, examined Kevin and made a diagnosis of dysplasia of
the hip secondary to post-traumatic closure of the triradiate
cartilage of the acetabulum which he undertook to correct sur-
gically. In Dr. Klassen’s opinion “the ‘problem with the ace-
tabulum was directly caused by the original trauma he sustained
in November of 1960.”

As the basis for their motion to vacate the order approving
the settlement, petitioners asserted that the “settlement made
in May of 1961 was entered into under a mutual mistake of fact
as to the actual injuries sustained by the Minor and that the at-
tending physician did not foresee the serious consequences of
the condition which was diagnosed by Dr. Klassen in January
of 1973, which required extensive medical treatment.”

Whether and under. what circumstances a settlement and re-
lease of a minor’s personal injury claim may be set aside has been
considered by this court on a number of occasions. It is a basic
premise that settlement of disputed claims is to be favored.
Schmidt v. Smith, 299 Minn. 103, 216 N. W. 2d 669 (1974).
Equally well established is the premise that vacating a stipula-
tion of settlement rests largely within the discretion of the trial
court, and the court’s action in that regard will not be reversed
unless it be shown that the court acted in such an arbitrary man-
ner as to frustrate justice. Schoenfeld v. Buker, 262 Minn. 122,
181, 114 N. W. 2d 560, 566 (1962). The premise applies with

yas ATS

equal force to orders approving settlements on behalf of minors.
The party seeking to establish a basis for avoiding a settlement
has the burden of proof. Ibid. The decision to set aside a settle-
ment for a minor rests largely within the discretion of the trial
court. See, Larson v. Stowe, 228 Minn, 216, 219, 36 N. W. 2d 601,
608 (1949). In the instant case the district court declined to do
so.

Petitioners concede that an unknown or unexpected conse-
quence of an injury that is known when a settlement was made
does not present a sufficient basis for avoiding the settlement
and the attendant releases. See, Jeffries v. Gillitzer, 302 Minn.
402, 225 N. W. 2d 17 (1975). Rather, they claim that the condi-
tion for which Kevin was examined and treated in 1973 should
be characterized as an injury that was unknown at the time the
parties agreed to the settlement and that the settlement, there-
fore, was made under a mutual mistake of fact and, hence, should
be set aside,

This court has held that the trial court may vacate a settlement
on behalf of a minor even if its terms purport to give a release
for unknown as well as known injuries “if, in the cautious exer-
cise of its discretion, it appears that separate and distinct in-
juries were sustained by the minor which, as a matter of mutual
mistake, were not contemplated or considered in. the settlement.”
Larson v. Stowe, 228 Minn. 216, 219, 86 N. W. 2d 601, 603. More
recently, however, this court has also declared that if the parties
intended a release to be final with respect to unknown as well
as known injuries, it will be held to be binding. Schmidt v. Smith,
supra; Jeffries v. Gillitzer, supra; and Barilla v. Clapshaw, 806
Minn, 437, 287 N. W. 2d 830 (1976). :

An examination of the record does not by any means convinc-
ingly demonstrate Kevin’s injuries to have been unknown and
not within the parties’ contemplation when they made the settle-
ment. Dr. Smith, to whom Kevin had been referred for a neuro-
logical examination, reported in his affidavit filed in support
of the settlement when it originally was proposed to the trial

476 Le

court that Kevin’s family had noted a tendency for him to have
difficulty with and soreness in his right leg when he exerted him-
self and became tired. Dr. Smith also stated, however, that he
could not discern in his office examination any abnormal func-
tion in Kevin’s right leg. In his affidavit, which petitioners filed
with their motion to vacate the order approving the settlement,
Dr. Klassen stated it was his opinion based on the history of
Kevin’s injury that the problem for which he treated Kevin was
directly caused by the original trauma Kevin sustained in Novem-
ber 1960. That in sum is the evidence presented in support of peti-
tioners’ contention. At best it is not free from ambiguity, and
from it inferences can be drawn either way concerning whether
the condition of Kevin’s leg was known or unknown to the parties
when the settlement was made. It cannot, therefore, be said that
petitioners have sustained their burden of proving that the in-
jury was unknown when the settlement ‘was approved.

An assumption that the injury was unknown at the time of
the settlement, however, places petitioners in no stronger posi-
tion, unless they can establish that there was no understanding
or intention to give a final release with respect to unknown as
well as to known injuries. After reviewing the records and evi-
dence, this court cannot say that petitioners have shown that the
parties neither had an understanding nor intended to give final
releases with respect to unknown as well as known injuries. Nor-
man Myers testified that he understood at the time the claims
were settled that the settlement could be opened should further
injuries become manifest. Notwithstanding that testimony, both
Norman Myers and Kevin’s mother testified at the court hearing
in support of their petition for approval of the settlement in 1961
that they knew they could make no further claims for injuries
on Kevin’s behalf, and then both signed the two releases, each of
which expressly covered unknown as well as known injuries.
Upon such a state of the record, this court cannot find that the
district court erred in concluding that petitioners failed to
present grounds on which the settlement and releases can be
avoided.

rs |

a ATT

The circumstances in which the settlement was made have also
been considered. Although petitioners were not represented by
counsel in the negotiations, Norman Myers testified that he had
weighed the advantages and disadvantages of retaining a lawyer
to commence suit and had concluded that settlement without suit
would be more advantageous both financially and otherwise. The
district court has also noted that petitioners were represented
at the settlement hearing by a lawyer whom they did not retain
and who was retained in their behalf by counsel for respond-
ents. Petitioners, however, have not shown that either their lack
of representation in the negotiations or their representation at
the settlement hearing by counsel not chosen by them resulted
in either unfairness or prejudice. Nor do any of the other circum-
stances surrounding the settlement evince unfairness.

Although it has been said that a more liberal rule is followed
in proceedings to set aside settlements of personal injury claims
entered into on behalf of minors than in other cases, McGovern
v. Lutz, 242 Minn. 397, 65 N. W. 2d 687 (1954), a rational and
factually sound basis for doing so must be established by one
seeking that relief. No such basis has been demonstrated here.

Accordingly, the order denying petitioners’ motion to vacate
the order approving the settlement must be affirmed.

Affirmed.

MICHAEL SCHUMANN v.
COMMISSIONER OF TAXATION.

253 N. W. 2d 130.
April 1, 1977—No. 46849.

Warren Spannaus, Attorney General, and Thomas K. Overton,
Special Assistant Attorney General, for relator.

Michael Schumann, pro se, for respondent.

Heard before ‘Todd, MacLaughlin, and Stahler, JJ., and con-
sidered and decided by the court en banc.

— 479

THOMAS J. STAHLER, JUSTICE.*

The commissioner of revenue seeks review of a decision of the
Tax Court (now the Tax Court of Appeals) awarding petitioner
a rent credit on his 1973 Minnesota income tax return,

Michael Schumann (petitioner), David Neuman, Jr., and an-
other shared a rented apartment during 1978, each paying a por-
tion of the rent directly to their landlord. Petitioner and Neu-
man could not agree who should receive the rent credit for the
year 1978 allowed by Minn. St. 290.981 to 290.992. Following
directions on the rent credit form, tax returns for both were
mailed in the same envelope with a note stating that they could
not agree who should receive the credit. The commissioner ini-
tially awarded Neuman the credit because he had obtained a
“certification of rent paid” form from his landlord. The Tax
Court reversed and ordered the commissioner to conduct a hear-
ing. After the hearing, the commissioner found that the coten-
ants had agreed Neuman should receive the credit and that
petitioner repudiated the agreement in order to set up a constitu-
tional challenge to the rent credit statute. The commissioner ac-
cordingly awarded Neuman the credit. The Tax Court again
reversed, holding that each should receive a $120 credit. The
court accepted petitioner’s argument that to deny a qualified
claimant the credit would be unconstitutional. It therefore read
the statute to permit each cotenant to claim the credit.

The relevant statutory sections provide:

“There shall be allowed to each individual claimant defined
in section 290.982 a credit in the amount provided in section
290.983 * * *.” Minn, St. 290.981.

“Claimant means a person who has filed a claim under sections
290.981 to 290.992, who was domiciled in this state during the
entire calendar year preceding the year in which he files claim
for relief, who resided in a rented or leased unit on which ad
valorem taxes are accrued, for not less than six months of the

*Acting as Justice of the Supreme Court by appointment pursuant
to Minn. Const. art. 6, § 2, and Minn. St. 2.724, subd. 2.

480 |

calendar year covered by the claim. When a unit is occupied by
two or more individuals and more than one such individual is
able to qualify as a claimant, such individuals may determine
between them as to who the claimant shall be, and all amounts
paid for the unit during the selected claimant’s occupancy shall
be considered as paid by him. If they are unable to agree, the
matter shall be referred to the commissioner of revenue and his
decision shall be final.” Minn. St. 290.982.

Minn. St. 290.983 prescribes the manner of computing the credit
and states that “[t]he credit shall not exceed $120 in any taxable
year.” The statute does not explicitly state that the credit is
limited to $120 per rented or leased unit. However, that appears
to be its intent. By providing that where two or more qualified
claimants live in the same unit, they may agree who is to get the
credit, the inference that only one credit per rental unit be al-
lowed is inescapable. Petitioner concedes that this was indeed
the legislative intent, but argues that the statute so construed
is unconstitutional.

Petitioner’s constitutional objection is two-fold. First, he
argues that the legislature cannot, consistent with Minn. Const.
art. 1, § 2, and art. 10, § 1,? limit the rent credit to $120 per
rental unit without regard to the number of qualified claimants
occupying the unit. Article 1, § 2, and art. 10, § 1, of the State
Constitution, impose no greater restriction on legislative power
to establish classifications than the Fourteenth Amendment to
the Federal Constitution, Elwell v. County of Hennepin, 301
Minn, 68, 221 N. W. 2d 588 (1974); In re Taxes on Property of
Cold Spring Granite Co. 271 Minn. 460, 136 N. W. 2d 782
(1965). In Cold Spring Granite, we stated:

“The propriety of classification for the purpose of legislation
is primarily for the legislature. Laws passed by the legislature

1The rent credit has been superseded by the “income-adjusted home-
stead credit.” See, Minn. St. 290A.21.

2 Article 9, § 1, of the constitution prior to the amendment adopted
November 5, 1974.

—— A481

are presumed to be valid, so we assume that the legislature makes
inquiry and rightly determines the propriety of the classifica-
tion which it adopts. This court will not disturb the legislative
determination unless the classification is clearly arbitrary and
has no reasonable basis.” 271 Minn. 466, 136 N. W. 2d 787.

We do not think a classification based on rental unit is unrea-
sonable. The statute was intended to afford renters some form
of tax relief corresponding to the homestead credit and other
benefits given homeowners. Homestead credits are independent
of the number of occupants, so it is not unreasonable that the
rent credit not depend on the number of qualified claimants oc-
cupying a unit.? In that the legislature intended to limit the
credit to $120 per rental unit and such a purpose is not unconsti-
tutional, the Tax Court’s decision awarding petitioner and Neu-
man each a $120 credit is erroneous.

There remains the question of how the credit should be al-
located. Petitioner’s second constitutional argument is that the
statute unconstitutionally favors one qualified claimant over an-
other. As petitioner reads the statute, when two or more qualified
claimants residing in the same rental unit cannot agree who shall
receive the credit, the commissioner of revenue must choose one
of them and award the entire credit to him. Petitioner claims that
this denies equal protection where each claimant pays a pro rata
share of the rent directly to the landlord. If petitioner’s inter-
pretation is correct, the statute would appear to encounter seri-
ous constitutional difficulties. However, the statute does not ex-
plicitly say the commissioner must award the entire credit to one
of the claimants. Instead, it provides that if the cotenants are
unable to agree who shall receive the credit, “the matter shall
be referred to the commissioner of revenue and his decision shall
be final.” § 290.982. We believe the language is ambiguous.
Where a statute is ambiguous, the construction that will avoid
constitutional conflict is to be preferred, even though it is less

8 Minn. St. 273.13.

482,

natural. Head v. Special School Dist. No. 1, 288 Minn. 496, 182
N. W. 2d 887 (1970), certiorari denied sub nom. Minneapolis
Federation of Teachers, Local No. 59, v. Spannaus, 404 U. S. 886,
92 S. Ct. 196, 30 L. ed. 2d 168 (1971). Accordingly, we hold that
where two or more qualified claimants each pay a portion of the
rent, the commissioner may divide the credit.

Petitioner also argues that the statute is an unconstitutional
delegation of legislative power to the commissioner. The au-
thority to award a rent credit on a case-by-case basis is in the
nature of judicial power. The proper inquiry is therefore wheth-
er the procedure established offends due process. The statute
does not establish any particular rules of procedure for the com-
missioner to follow, but by implication it requires the commis-
sioner to conduct an evidentiary hearing, as was done in this
case. The commissioner’s decision is subject to review by the Tax
Court. § 290.989. We believe this procedure comports with due
process.

The commissioner, after hearing evidence, determined that
petitioner and Neuman had agreed Neuman was to claim the
credit. Petitioner does not challenge the correctness of this find-
ing on appeal, and we accordingly accept it. Since petitioner
agreed to let Neuman claim the credit, the commissioner properly
denied petitioner’s claim for a refund. The decision of the Tax
Court is therefore reversed with directions to affirm the decision
of the commissioner.

Reversed.

bn |

LOIS GARBERG v. MINNESOTA DEPARTMENT OF
PUBLIC WELFARE AND ANOTHER.

252 N. W. 2d 274,
April 1, 1977—No. 46815.

—— ee 483

es

Paul Onkka, Legal Assistance of Ramsey County, for appel-
lant.

Warren Spannaus, Attorney General, Thomas L. Fabel, Dep-
uty Attorney General, and Tibor M. Gallo, Special Assistant
Attorney General, for respondent Department of Public Welfare.

William B. Randall, County Attorney, and Margaret M. Mar-
rinan, Assistant County Attorney, for respondent Ramsey Coun-
ty Welfare Board.

ee

PER CURIAM,

This is an appeal from an order of the district court deny-
ing appeal from an order of the Minnesota Department of Pub-
lie Welfare which upheld a termination of benefits under Aid
to Families with Dependent Children (AFDC) ordered by the
Ramsey County Welfare Board. We affirm.

Prior to her remarriage, appellant received AFDC benefits
in an amount based on her needs as well as those of her children.
Following her remarriage, the amount of AFDC benefits appel-~
lant received was reduced to an amount required for the chil-
dren’s needs alone since appellant’s needs were thereafter pre-
sumably to be met by her new husband. Subsequently appellant
was notified that these reduced benefits were also to be termi-
nated. Appellant contests this termination of benefits for her
children,

The facts relating to the termination of benefits are these:
Prior to her remarriage appellant sold her solely owned home
and pooled the proceeds of that sale, $9,000, with $25,500 of her
fiance’s money to make a downpayment on a jointly owned home,
the purchase price of which was $42,500. Shortly thereafter,
appellant and her fiance were married. The welfare board based
its termination of benefits on the ground that appellant had an

484 es

equitable interest in real property in excess of the $7,500 maxi-
mum provided by Minn. St. 256.73, subd. 2.

Under this statute ownership by specified persons of real es-
tate used as a home having a market value, less encumbrances,
in excess of $7,500 is a bar to eligibility for AFDC benefits un-
less the county welfare board determines that the real estate
is unavailable for the support of the family. Two examples of the
unavailability contemplated by the statute are (1) where the
home is in joint tenancy, the father deserts his family, and the
home cannot be sold or refinanced but can provide shelter for the
family, or (2) where there is no buyer for the home at a rea-
sonable price and the property cannot be refinanced. Depart-
ment of Public Welfare, AFDC Program Manual, IV-L-3.

The regulations of the county welfare department do not con-
tain anything bearing precisely on the sitaution presented here,
but the Income Maintenance Manual, § ITI-3111.01, states that
real property is not a factor in eligibility for aid for children
in the situation where the stepfather deeds his real property to
his wife, an AFDC recipient, as a joint tenant.

This case is not a situation where the stepfather using only
his own funds purchased property in joint tenancy with the de-
pendent children’s mother. Rather, we have a situation where the
mother has taken the proceeds from the sale of her solely owned
house, an amount which exceeded the statutory maximum and
technically rendered the proceeds unavailable for use in sup-
porting the children by putting the entire proceeds into a jointly
owned homestead. Her excess equity is technically unavailable
because the property is homestead property, and her husband
has stated that he will not consent to any sale or refinancing
of the property. Under Minn. St. 507.02, appellant can liquidate
her excess equity in the homestead only with her husband’s con-
sent.

Under the circumstances, however, we believe that appel-
lant’s actions should bar her claim that the excess equity in her
house is unavailable. It was appellant who put the excess equity

a A85

beyond her own control, so that if appellant were to prevail in
this matter, she would in effect be profiting from a situation of
her own creation.

Affirmed.

JOHN M. NASSEFF, JR., d.b.a. NASSEFF PLUMBING,
v. ROBERT SCHOENECKER AND OTHERS,
OSCAR SUNDBERG, APPELLANT.

253 N. W. 2d 374.

April 8, 1977—No. 46844.

486. es

P|

Meyer, Hiniker & Fleming and Richard C. Hiniker, for appel-
lant.

John T. Finley, for respondent Nasseff.

Meier, Kennedy & Quinn, A. D. Kennedy, Jr., and Gordon W.
Shumaker, for respondents Huysentrait. .

Eckberg, Lammers, Briggs & Wolff and Paul A. Wolff, for
respondent Greeder.

Oppenheimer, Wolff, Foster, Shepard & Donnelly, Mark G.
Ohnstad, and William P. Studer, for respondent Lampert
Lumber Company.

Heard before Rogosheske, Peterson, and Kelly, JJ., and con-
sidered and decided by the court en banc.

ROGOSHESKE, JUSTICE.

This is an appeal by Oscar Sundberg from a judgment order-
ing foreclosure of coordinate mechanics liens against real prop-
erty owned by him in fee simple arising out of remodeling im-
provements made to the subject property by four lien claimants
under separate contracts with Sundberg’s lessees. The issue
presented concerns the interpretation and application of Minn.
St. 514.011. This section enacted in 1973, added provisions re-
quiring notices by contractors, subcontractors, and materialmen
as prerequisites to validating and preserving the mechanics lien
remedy for improvements to real property.1 The question pre-

1Minn. St. 514.011 provides: “Subdivision 1. Every person who enters
into a contract with the owner for the improvement of real property
and who has contracted or will contract with any subcontractors or ma-
terialmen to provide labor, skill or materials for the improvement shall
give the owner the notice required in this subdivision. The notice shall
be delivered personally or by certified mail to the owner or his au-
thorized agent within ten days after the contract for the work of im-
provement ‘is agreed-upon. The notice shall be in at least 10-point bold

a 487

sented on this appeal may be stated thus: If the owner of a lease-
hold interest enters into a contract for the improvement of real
property with a supplier of labor or materials, and the fee owner

type, if printed, or in capital letters, if typewritten and shall state as
follows:

“(a) Persons or companies furnishing labor or materials for the im-
provement of real property may enforce a lien upon the improved land
if they are not paid for their contributions, even if such parties have
no direct contractual relationship with the owner;

“(b) Minnesota law permits the owner to withhold from his contrac-
tor so much of the contract price as may be necessary to meet the de-
mands of all other lien claimants, pay directly such liens and deduct
the cost thereof from the contract price, or withhold amounts from his
contractor until the expiration of 90 days from the completion of such
improvement unless the contractor furnishes to the owner waivers of
claims for mechanics’ liens signed by persons who furnished any labor
or material for the improvement and who provided the owner with
timely notice.

“A person who fails to provide the notice shall not have the lien and
remedy provided by this chapter.

“The notice required by this subdivision is not required of any per-
son who is himself an owner of the improved real estate, to any corpo-
rate contractor of which the owner of the improved real estate is an of-
ficer or controlling shareholder, to any contractor who is an officer or
controlling shareholder of a corporation which is the owner of the im-
proved real estate, or to any corporate contractor managed or con-
trolled by substantially the same persons who manage or control a cor-
poration which is the owner of the improved real estate.

“Subd. 2. Every person who contributes to the improvement of real
property so as to be entitled to a lien pursuant to section 514.01 except.
a party under direct contract with the owner must, as a necessary pre-
requisite to the validity of any claim or lien, cause to be given to the
owner or his authorized agent, either by personal delivery or by cer-
tified mail, not later than 20 days after the lien claimant has first fur-
nished labor, skill or materials for the improvement, a written notice
in at least 10-point bold type, if printed, or in capital letters, if typewrit-
ten, which shall state:

“NOTICE OF OWNER
“TO: (name and address of owner)

“We are authorized by law to provide you with this NOTICE. Your

failure to read it carefully could result in unnecessary expense to you

488 —

has knowledge that the improvement is being made but fails to
protect his interest from mechanics liens by serving or posting
notice that the improvement is not made at his instance, as pro-
vided by Minn. St. 514.06,2 does a mechanics lien attach to the

or in the loss of Your .........-.eeeeeeeeeee AL Lecce cece e ence eee e eee
(type of property) (address of property)
OWE, cece cece cece nce een e eee ee een e en eeeeee ., have been hired by
(name and address of subcontractor)
your CONTRACTOR, ...... eres to provide

(hame of contractor)
es for use in improving your
(type of service or material)

property. We estimate our charges will be .............-0605 ete e neces

(value of service or material)
If we are not paid by your CONTRACTOR, ‘we can file a claim against
your property for the price of our services unless you have ALREADY
paid your CONTRACTOR in full. ENFORCEMENT OF OUR CLAIM
COULD MEAN THE LOSS OF YOUR PROPERTY IF YOU ARE UN-
ABLE TO PAY US FOR OUR SERVICES.

“To protect yourself, Minnesota law allows you to either:

“4, Withhold payment to your CONTRACTOR for up to 90 days
from the completion of the improvement or until he provides you with
a waiver of claim from us which states that we will not file a claim
against your property; or

“2, Pay us directly and deduct the amount paid from the amount
you owe your CONTRACTOR.’

“Subd. 3. A contractor who contracts with any subcontractors or
materialmen to provide labor, skill or materials for the improvement
shall upon request provide the subcontractor or materialman with the
name and address of the owner. For purposes of this section ‘owner’
means the owner of any legal or equitable interest in real property who
enters into a contract for the improvement of such real property.

“Subd. 4. The notice required under this section shall not be re-
quired to be given where the contractor is managed or controlled by
substantially the same persons who manage or control the owner of the
improved real estate or in connection with an improvement to real
property consisting of or providing (i) more than four family units and
the improvement is wholly residential in character, or (ii) more than
10,000 total usable square feet of floor space and the improvement is
partly or wholly nonresidential in character.”

2Section 514.06 provides: “* * * When improvements are:-made by
one person upon the land of another, all persons interested therein
otherwise than as bona fide prior encumbrancers or lienors shall be

— 489
fee owner’s interest notwithstanding the contracting lien
claimant’s failure to serve the notices required by § 514.011? We
hold under the stipulated facts that where improvements are
made under separate contracts between the lessees, owners of
an equitable interest in the property, and the four lien claimants,
none of who contracted with any subcontractor or material-
men to provide labor, skill, or material for the improvements,
§ 514.011 does not apply, and the notices thereby required need
not be served upon either the contracting lessees or the fee
owner. Further, the fee owner’s knowledge of the improvements
and his failure to serve or post notice of disclaimer subjects his
interest to the liens. Accordingly, we affirm the judgment.
The trial court’s determination was based upon these stipu-
lated facts. Sundberg, the fee owner of the subject property,
entered into a written 15-year lease, containing an option to pur-
chase after 10 years, with Robert Schoenecker and others. This
was nonresidential property providing less than “10,000 total
usable square feet of floor space.”* The lessees were expressly
authorized to remodel the property for use as a bar and restau-
rant, They entered into four separate contracts for remodeling
improvements with the lien claimants, Nasseff Plumbing,
Lampert Lumber Company, Greeder Electric, and Venta-Hood.
At oral argument it was acknowledged that none of the lien
claimants contracted with any subcontractors or materialmen
to provide labor, skill, or materials for the improvements. Sund-
berg had actual knowledge that these improvements were being
made and, while they were in progress, visited the premises on
several occasions. He did not, however, serve or post notice on

deemed to have authorized such improvements, in so far as to subject.
their interests to liens therefor. Any person who has not authorized the
same may protect his interest from such liens by serving upon the per-
sons doing work or otherwise contributing to such improvement within
five days after knowledge thereof, written notice that the improvement.
is not being made at his instance, or by posting like notice, and keeping
the same posted, in a conspicuous place on the premises. * * *”

8 § 514.011, subd. 4.

490 ee

the property that the improvements were not being made at his
instance, as required by § 514.06, to protect his fee interest from
potential liens of the lessees’ contractors, When the lessees failed
to pay for the improvements, the four contracting claimants
joined in this action to foreclose their timely filed liens in the
following amounts: Nasseff Plumbing, $5,322.90; Lampert
Lumber Company, $1,867.32; Greeder Electric, $1,702.31; and
Venta-Hood, $8,700. These sums represent the reasonable value
of the labor and materials furnished by the lien claimants.

At trial and on appeal, Sundberg argues that the mechanics
liens cannot be enforced against his fee interest where the lien
claimants failed to provide notice to him in strict compliance
with § 514.011, and since the stipulated facts establish that none
of the lien claimants so complied, each forfeited the liens asserted.
Although disputed by some of the lien claimants, assuming each
lien complaint’s noncompliance with the notice requirements of
§ 514.011, we are persuaded that the section has no application
to the facts of this case where the lien claimants did not subcon-
tract in making the improvements.

In 1978, the legislature, at the urging of the attorney general,
sought to correct a problem then frequently faced by homeowners
when they entered into contracts with building contractors for
the improvement of their property. Often, as the proponents of
the legislation urged, a homeowner would find that, after he had
paid the contractor in full, numerous other subcontractors or
materialmen that were previously unknown to him had filed
mechanics liens against his property.* To rectify this evil, the
legislature added the notice requirements of § 514.011. The evi-
dent purpose was to protect an owner from hidden liens arising
from labor or materials supplied to the contractor by subcontrac-
tors or materialmen who extended credit to the contractor on
the security of the owner’s property and whose identities were

+See, Spannaus, Mechanics Lien Law Reform, 41 Hennepin Lawyer,

No. 5, p. 10; Comment, The “Forgotten Man” of Mechanics’ Lien Laws
—The Homeowner, 16 Hastings L. J. 198.

EE 491

unknown and often unascertainable by the owner. The notice re-
quirements of the section are limited to residential property con-
sisting of not more than four family units and to nonresidential
property providing not more than 10,000 square feet of floor
space.® To accomplish this protective objective and at the same
time to preserve the statutory lien remedy to those contributing
to the improvement, the statute requires not one but two separate
notices. Section 514.011, subd. 1, requires a contractor who has
contracted or will contract with subcontractors or materialmen
to put the owner on notice of the risk that the latter have lien
rights despite the absence of any contractual relationship with
the owner. The notice must also specify the means by which the
owner can be assured that subcontractors and materialmen are
paid before the contractor receives full payment. Failure of the
contractor to give notice within 10 days after his agreement with
the owner results in a forfeiture of his own lien, Once a subcon-
tractor or materialman begins furnishing labor or materials, the
owner is entitled to another separate notice of either supplier’s
right to make claims or liens upon the contractor’s failure to pay.
This notice must be served upon the owner within 20 days after
the labor or materials are first furnished, and a failure to do so
invalidates any claim or lien by a subcontractor or materialman
against the owner. Section 514.011, subd. 8, requires the contrac-
tor, upon request, to furnish to subcontractors or materialmen
the name and address of the owner, which for this section is re-
stricted to mean the owner of any legal or equitable interest who
has contracted for the improvement of the property.

It is clear therefore that the notice requirements of neither
subd. 1 nor subd. 2 of § 514.011 apply to the stipulated facts. The
lessees entered into agreements with four separate contractors,
who entered into no subsidiary contracts for the improvements.
Thus, neither the 10-day notice requirement of subd. 1 nor the
20-day notice requirement of subd. 2 imposes on the four contrac-

5 § 514.011, subd. 4.

492

tors any burden to given notice to the lessees who were the
statutory contracting owners.

It is equally clear that § 514.011 has no application to the fee
owner because, even if there were subsidiary contracts, he is not
the owner of an interest in the subject property who contracted
for the improvements within the contemplation of subd. 3.
Rather, it is the lessees who are the owners of an equitable inter-
est, which interest this court has held since the last century may
be subject to a lien. Dunham Associates, Inc. v. Group Invest-
ments, Inc. 301 Minn. 108, 223 N. W. 2d 376 (1974) ; Benjamin
v. Wilson, 34 Minn. 517, 26 N. W. 725 (1886). Consistent with
that interpretation of the section and of more significance is the
statutory scheme for the protection of the interest of a fee owner
against mechanics liens. If he is not in possession of the property
and has no knowledge that the improvements are being made,
a lien may not be imposed on his interest. Berglund & Peterson
v. Abram, 148 Minn. 412, 182 N. W. 624 (1921). Where the fee
owner has such knowledge, § 514.06 imposes upon him an af-
firmative burden to serve or post notice that the improvements
are not being made at his instance, thereby disclaiming any re-
sponsibility for the payment to lien claimants. Knoff Woodwork
Co. v. Zotalis, 213 Minn, 204, 6 N. W. 2d 264 (1942); Congdon
v. Cook, 55 Minn. 1, 56 N. W. 253 (1893). Sundberg’s failure to
serve or post such notice therefore subjects his fee interest to
the improvement contractors’ liens. The mischief to a contracting
owner of nonpayment by the contractor to subcontractors or ma-
terialmen intended to be remedied by § 514.011 simply did not
occur in this case.

Affirmed.

a 493

: GEORGE H. GUIDER AND ANOTHER v.
MAYCO INC. AND OTHERS.

252.N. W. 2d 601.

April 8, 1977—No. 46480.

Fred Albert, for appellants.
J.B. Wolfson, Frauenshuh & Fahlberg and Ronald R. Frauen-
shuh, for respondents Bernice and Benedict Peltz.

Heard before Todd, MacLaughlin, and Stabler, JJ., and con-
sidered and decided by the court en banc.

MACLAUGHLIN, JUSTICE.

This is an appeal from a judgment of the district court in an
action to determine adverse claims to certain real property.
Plaintiffs commenced this action to extinguish the interests of
approximately 23 defendants who had purchased and recorded
mortgagees’ interests in certain real property. The trial court
determined that the summons and complaint served by plaintiffs
on these defendants were inadequate to give proper notice of
a termination of their interests. Because we believe the evidence
clearly supports the determination of the trial court, we affirm.

494 a

Plaintiffs George and Mavis Guider are the fee owners of a
parcel of property located in Anoka County. By means of a con-
tract for deed dated May 11, 1971, the Guiders sold the property
to defendant Mayco Inc. (Mayco). The property was thereafter
platted into 20 lots and designated “Brywood Acres.”

Subsequent to the platting Mayco gave mortgages on the in-
dividual lots to Minnesota Contract Corporation (MCC). MCC
subsequently assigned its mortgagee’s interest in the lots to var-
ious individuals and corporations who paid substantial sums to
MCC for these interests. The assignments were made without the
knowledge of the Guiders.

By June of 1973, Mayco was delinquent on three payments
due to the Guiders under the contract for deed. Pursuant to
Minn. St. 1974, § 559.21,1 the Guiders served notices of cancella-
tion on Mayco on June 7, 1973, and on MCC on June 19, 1973.
The other mortgagees, as assignees of MCC, were not served
with notices of cancellation, although the assignments were of
record in the Anoka County office of the Register of Deeds.
Neither Mayco nor MCC acted within the 30-day limit of Minn.
St. 1974, § 559.21, to correct the defaults in the contract for deed.

1Minn. St. 1974, § 559.21, provided in relevant part: “When default is
made in the conditions of any contract for the conveyance of real estate
or any interest therein, whereby the vendor has a right to terminate
the same, he may do so by serving upon the purchaser, his personal rep-
resentatives or assigns, either within or without the state, a notice spe-
cifying the conditions in which default has been made, and stating that
such contract will terminate 30 days after the service of such notice un-
less prior thereto the purchaser shall comply with such conditions and
pay the costs of service, together with an amount to apply on attorneys’
fees actually expended or incurred, of $50 when the amount in default
is less than $500, and of $100 when the amount in default is $500 or
more; * * *

eR Kk Kk Ok

“If, within the time mentioned, the person served complies with such
conditions and pays the costs of service and attorneys’ fees as provided
herein, the contract shall be thereby reinstated; but otherwise shall
terminate.”

Le 495

The Guiders brought suit in August of 1978, seeking an or-
der to show cause why Mayco and MCC should not be restrained
from continuing construction on the Guiders’ property despite
the notices of cancellation. The original summons and complaint
named as defendants only Mayco, MCC, and an excavating com-
pany which possessed a mechanics lien on the property.

On October 12, 1978, the Guiders sought and received an order
of the court joining all of the other mortgagees as defendants.
In November 1978, the assignee-mortgagees were served with
an amended summons and complaint naming them as defendants.
The complaint referred to the “attached * * * Exhibit A,” a
copy of the contract for deed, and the “attached * * * Exhibit
B,” a copy of a document from the Anoka Abstract Company
setting forth the names and interests of the defendants in the
property. In fact, however, neither Exhibit A nor Exhibit B was
actually attached or served upon these defendants. Instead, at-
tached to the complaint was an instrument entitled “Cancella-
tion of Contract for Deed, Notice and Affidavits” which named
Mayco and “its assignees” but did not name the individual mort-
gagees.?

None of the defendants responded within either the 20-day
limit of the summons or the 30-day limit of the attached pur-
ported notice of cancellation. Five answers in all were eventually
filed, while attorneys representing 15 defendants appeared at
trial.

Trial was to the court, and the trial court found that while

2 The complaint also contained the following language concerning Ex-
hibit A: “That the Contract for Deed, Exhibit A, has been duly can-
celled by service of a Notice of Cancellation on the Defendants, Mayco,
Inc., and Minnesota Contract Corporation, on June 7, 1973, and June 19,
1973, respectively, and that said Defendants have failed and neglected
to correct the defaults therein stated and the affidavit of failure to com-
ply has been duly filed of record in the office of the Register of Deeds
in Anoka County on August 8, 1973.”

Of course, the interests of the remaining assignee-mortgagees had not
been cancelled since they were never served with the notice.

496 es

the interests of Mayco and MCC in the Guiders’ property had
been cancelled, the interests of the remaining mortgagees sur-
vived because the notice contained in the complaint and in the
attached notice of cancellation was inadequate. The Guiders
moved for amended findings or a new trial, but the district court
denied the motion and dismissed the complaint. This appeal fol-
lowed. :

The only question for our decision is whether the trial court
correctly found that the interests of the mortgagees, other than
MCC, in the Guiders’ property had not been extinguished. There
is no question that the requirement of notice of cancellation un-
der Minn. St. 1974, § 559.21, extends to mortgagees of record,
whether or not the vendor has actual knowledge of the mort-
gage. Stannard v. Marboe, 159 Minn. 119, 198 N. W. 127 (1924).
In Stannard we observed:

«“* * * Obviously, anyone acquiring title to real estate is
charged with notice of the matters of record, and, where a ven-
dor is seeking to enforce a forfeiture because of default, less
harm can come from charging him with notice of the matters
of record than will follow the opposite conclusion. We adopt the
rule that the constructive notice, in such case, is the equivalent
of actual knowledge, and either is sufficient to compel the ven-
dor to serve such notice on the vendee’s mortgagee or assignee
before he can be deprived of his rights in the interest of the
vendee in the property.” 159 Minn. 121, 198 N. W. 127.

Notice of cancellation under the statute is not, of course, the
sole and exclusive vendor’s remedy upon default by the vendee.
See, Miller v. Snedeker, 257 Minn. 204, 101 N. W. 2d 213 (1960) ;
Boulevard Plaza Corp. v. Campbell, 254 Minn. 123, 94 N. W. 2d
273 (1959).3 It is clear, however, that whatever course is fol-

$In Boulevard Plaza Corp. v. Campbell, 254 Minn. 123, 133, 94 N. W.
2d 278, 282 (1959), we stated as follows: “* * * [Minn. St. 559.21] is
cumulative and not exclusive to the extent of ruling out the vendor’s
right of action against a defaulting vendee for specific performance on

De 497

lowed to extinguish an interest in real property, there must be
sufficient notice to affected parties so that they are adequately
informed of the attempt to terminate their interests.

In the instant case the assignee-mortgagee defendants point
to the following deficiencies in the documents served upon them
which they argue, taken together, make the attempt to terminate
their interests insufficient:

(1) The complaint stated that the contract for deed had been
“duly cancelled” when, in fact, any interest held by these defend-
ants had not been cancelled.

(2) The complaint described the property by metes and
bounds which was not meaningful to these defendants since the
property had been platted at the time they acquired their in-
terests.

(3) The complaint referred to attached Exhibits A and B
but neither exhibit was actually attached to the summons and
complaint served upon these defendants.

(4) The notice of cancellation which was attached to the
complaint was served with a summons. This could not help but
result in confusion since the summons indicated 20 days for an
answer while the cancellation notice indicated 30 days.

(5) The notice of cancellation is directed only to “Mayco
* * * and its assignees” and does not mention any of these de-
fendants or their interests by name.

The trial court found that the confusion resulting from these
deficiencies made the notice inadequate and noted that “[i]f
the adequacy of the notice of cancellation is questionable, the
Court will not find a forfeiture of the defendants equity of re-
demption.”

We agree that the action commenced by the Guiders and the
attached notice of cancellation were not sufficient to put the as-
signee-mortgagee defendants on notice that the Guiders were
attempting to terminate their interests in the land. In failing to

the one hand, or on the other, for a judicial determination of the con-
tract.”

498

attach a copy of the register of the Anoka Abstract Company
pertaining to Brywood Acres, noted as Exhibit B in the com-
plaint, the Guiders effectively failed to inform these defendants
of the specific interests to be terminated. Since these defendants
are not named in the notice of cancellation itself, and since their
individual lots are not described in any of the documents, the
only specific mention of them by name is in the caption of the
amended summons and complaint. The confusing aspects of
the documents served on them, coupled with the likelihood that
these defendants would have responded if they had understood
their considerable investments were at risk of being lost, make
reasonable the district court’s conclusion that there was inade-
quate notice to terminate their interests.

The Guiders argue that the individual mortgagee’s interests,
based as they are upon assignment from MCC, are terminated
since MCO’s interest has been cancelled through proper service
of the notice of cancellation upon it. This contention, however,
is not correct. As assignees of MCC, these defendants are enti-
tled to all the rights possessed by MCC including notice of can-
cellation in the event of default. This right followed the equit-
able interest as far as it extended, provided that each transfer
of interest was a matter of record to put the Guiders on construc-
tive notice. As assignées, the individual mortgagees were there-
fore entitled to proper notice of cancellation or a proper ju-
dicial action commenced to terminate their interests.

It is clear that while Mayco and MCC no longer have an in-
terest in the real property, the other defendants continue to have
an interest. The Guiders can, of course, take appropriate action
to terminate those interests. For the present, however, we hold
that there is sufficient evidence to support the findings and con-
clusions of the trial court.

Affirmed.

Ll 499

JOHN J. GREER AND OTHERS v.
JOAN KOOIKER AND OTHERS.
HARRY LAIBLE AND ANOTHER,

THIRD-PARTY DEFENDANTS. .

253 N. W. 24.133.

April 8, 1977—No. 46422.

Benjamin Vander Kooi, for appellant Cyril M. Koob.
Taylor & Malone and William C. Taylor, for appellant Olivia
M. Koob.

Brecht, Hedeen & Hughes and William T. Hedeen, for respond-
ent plaintiffs.

Erickson, Zierke, Kuderer & McKenna and Elton A. Kuderer,
for respondent Laible.

Gislason, Dosland, Hunter & Malecki and Daniel A. Gislason,
for respondent Dowden.

Heard before Kelly, Yetka, and Scott, JJ., and considered and
decided by the court en banc.

YETKA, JUSTICE.

In this action plaintiffs sought specifie performance or, in
the alternative, damages for breach of a contract to sell a farm.
The trial court found defendants entered into a written contract
for the sale of the farm to plaintiffs and subsequently conveyed
the same land to a third party. The court awarded damages of
$37,500 to plaintiff buyers, damages of $4,725 to the real estate
agent for a breach of a listing contract, and $5,000 to the sub-

Es 5OL

sequent buyer as damages for defending her title. We affirm in
part, and reverse on the issue of damages awarded to plaintiffs.

These issues are presented by the appeal:

(1) Whether the memorandum executed between the parties
on July 19, 1973, satisfied the statute of frauds, Minn. St. 513.05.

(2) Whether the trial court’s findings that a contract for
the sale of land existed between the parties on July 19, 1973,
and that the defendants breached that contract by conveying the
same land to a bona fide purchaser were clearly erroneous.

(3) Whether the trial court erred in computing the date of
the breach of the contract for purposes of assessing damages.

(4) Whether the real estate agent was entitled to a commis-
sion.

(5) Whether the real estate agents were negligent in their
conduct of the negotiations.

Defendants Cyril Koob and his wife, Olivia, owned a 482.08-
acre farm in Murray County, Minnesota. Mr. Koob was himself
a licensed real estate salesman, and had experience selling real
estate and drafting contracts for deed.

On August 24, 1970, Mr. Koob listed the farm with Harry Lai-
ble, a real estate agent in Slayton, Minnesota. The parties signed
an exclusive listing agreement to last initially for 12 months, but
to be renewed automatically thereafter. The contract listed the
legal description of the farm, set a minimum price of $187,500,
and provided for a commission of 8 percent of the price obtained.
Mrs. Koob did not sign the contract.

In April 1970, Mr. and Mrs. Koob had executed a quitclaim
deed to the farm to Mr. Koob’s brother, along with a mortgage,
to secure a $25,000 loan. The deed was filed of record in March
1971. The brother then placed a quitclaim deed to the farm, is-
sued to Mrs. Koob, in escrow, to be delivered upon payment of
the outstanding debt by Mr. and Mrs. Koob.

In July 1973, Mr. Koob’s real estate agent began serious ne-
gotiations for the sale of the farm with the plaintiffs, John
Greer, R. D. Bertell, and Wyman Steffen, who were from Iowa.

502

Accompanied by an Iowa real estate broker, Fred Dowden, the
plaintiffs, two of whom were practicing attorneys, met Mr. Koob
and Mr. Laible at the Koob’s farm on July 19, 1978. The parties
viewed the farm and then negotiated for about an hour concern-
ing the sale of the farm. During the conversation, one of the
plaintiffs, John Greer, a practicing Iowa attorney, prepared a
memorandum, which was then signed in the margin by the plain-
tiffs and Mr. Koob. The sale price was $157,500, which did not
include the standing crop.

After the memorandum was signed, Mr. Koob took the docu-
ment to his wife in the house and said, “[t]hat this is the start
of selling the farm,” and told her to sign it, which she did.

A few minutes later Mr. Koob returned to the farmyard with
the document, and shook hands with the plaintiffs. Mr. Laible
took a $5,000 check as down payment and placed it in his trust
account. Mr. Dowden, plaintiffs’ real estate broker, then took
the signed memorandum with him to have a contract for deed
prepared. The contract for deed was prepared by a Minnesota
attorney, executed by plaintiffs, and presented to Mr. Koob, who
refused to sign it. He stated three objections. First, he wanted
the advance interest payment by the purchasers to be mandatory
rather than optional. Second, he expressed concern about paying
off the debt he owed to his brother. Finally, he complained about
the rate of commission for the real estate broker.

Laible notified Dowden of Koob’s objections. In response,
Dowden offered to cosign a note to help pay off the debt Koob
owed, and obtained a commitment from the buyers to prepay the
first year’s interest. Koob still refused to sign the formal con-
tract for deed, however.

On September 6, 1978, the Koobs sold the farm to another
party, Joan Kooiker, for $192,500. The purchase price included
275 acres of standing crops, valued at $37,500, and various equip-
ment.

- When they discovered the land had been sold, the Iowa pur-
chasers brought this action against Mr. and Mrs. Koob and Joan

Le 508

Kooiker seeking specific performance of their alleged contract
for sale or, in the alternative, damages for breach of contract.
Defendant Joan Kooiker counterclaimed against plaintiffs for
confirmation of her contract for sale, and cross-claimed against
the Koobs for the cost of defending against plaintiffs’ claims.
The Koobs then brought third-party actions against Harry Lai-
ble and Fred Dowden for negligence or breach of duty in con-
ducting the sale, and also amended their answer to assert the
defense of the statute of frauds. Finally, Harry Laible, as third-
party defendant, counterclaimed against the Koobs for his com-
mission pursuant to the real estate listing agreement.

‘The case was tried to the court without a jury, and the court
found against the Koobs on all claims. It confirmed the sale of
the farm to Joan Kooiker and awarded her damages of $5,000;
it awarded plaintiffs $37,500 against the Koobs for breach of
contract; and it awarded Harry Laible $4,725 as his commis-
sion from Mr. Koob on the sale. The defendants moved for an
order granting judgment “notwithstanding the findings of fact,
conclusions of law, and order for judgment, and in the alter-
native a new trial.” The motion was denied and defendants prop-
erly appeal from that part of the order denying a new trial.

A. The Contract for Sale

Appellants both attack the validity of the trial court’s find-
ing that a contract of sale existed between themselves and the
plaintiffs on four grounds. First, they contend the memorandum
failed to satisfy the statute of frauds. Second, they argue the
parties intended the formal contract for deed and not the mem-
orandum to constitute the contract. Third, they argue the con-
tract, if any, between Kr. Koob and the plaintiffs was void be-
cause it was not joined in by Mrs. Koob and thus constitutes an
attempt to convey the homestead without the consent of the
spouse in contravention of Minn. St. 507.02.1 Finally, they argue

1 Minn. St. 507.02, provides: “If the owner be married, no mortgage
of the homestead, except for purchase money unpaid thereon, nor any
sale or other alienation thereof shall be valid without the signatures of

504: |

the trial court erred in admitting the July 19 contract because
of failure to pay the mortgage registration tax. Hach will be
treated in turn.
HE The Statute of Frauds

Minn. St. 518.05 of the statute of frauds provides:

“Fivery contract for the leasing for a longer period than one
year or for the sale of any lands, or any interest in lands, shall
be void uriless the contract, or some note or memorandum there-
of, expressing the consideration, is in writing and subscribed
by the party by whom the lease or sale is to be made, or by his
lawful agent thereunto authorized in writing; and no such con-
tract, when made by an agent, shall be entitled to record unless
the authority of such agent be also recorded.”

The statute expressly requires the memorandum to state the con-
sideration and to be subscribed by the vendor. In addition to
these two statutory requirements, this court has required the
contracting parties to be identified with reasonable certainty,
the land to be sufficiently described, and the general terms
and conditions of the transaction to be specified. Radke v. Bren-
on, 271 Minn. 35, 38, 134 N. W. 2d 887, 890 (1965); Doyle v.
Wohlrabe, 243 Minn. 107, 66 N. W. 2d 757 (1954) ; Scott v. Mar-
quette National Bank, 173 Minn. 225, 217 N. W. 186 (1927);

both husband and wife.

“A husband and wife, by their joint deed, may convey the real estate
of either. The husband, by his separate deed, may convey any real
estate owned by him, except the homestead, subject to the rights of his
wife therein; and the wife, by her separate deed, may convey any real
estate owned by her, except the homestead, subject to the rights of her
husband therein; and either husband or wife may, by separate convey-
ance, relinquish his or her rights in the real estate so conveyed by the
other. Subject to the foregoing provisions, either husband or wife may
separately appoint an attorney to sell or convey any real estate owned
by such husband or wife, or join in any conveyance made by or for the
other. A minor husband or wife has legal capacity to join in a convey-
ance of real estate owned by his or her spouse, so long as the minor hus-
band or wife is not incapacitated because of some reason other than his
or her minor age.”

— 505
Swallow v. Strong, 83 Minn. 87, 85 N. W. 942 (1901). Thus, five
elements must be present in the memorandum: (1) A statement
of the consideration; (2) an adequate description of the parties;
(3) an adequate description of the land; (4) the general terms
and conditions of the transaction; and (5) subscription by the
vendor. If these elements are present the contract is not void?
for failure to comply with the statute. In addition, two rules of
construction should be noted. First, parol evidence is admis-
sible to explain (but not to contradict or to supply) a term of
the memorandum; judicial notice may also be used. Second,
the basic end of the statute must be furthered. This court stated
in Doyle v. Wohlrabe, 243 Minn. 107, 110, 66 N. W. 2d 757, 761
(1954) :

«x * * When we recall the historical fact that the statute of
frauds was originally enacted simply to prevent the frauds to
which transfers of land by parol and livery of seizin lent them-
selves, we will readily recognize that its basic purpose is only
to provide reasonable safeguards to insure honest dealing and.
that it was not enacted to make a fetish of literal statutory com-
pliance or a fetish of requiring a perfect written contract. That
adherence to the strict letter of the statute or perfection in the
drafting of the written conveyance are not ends in themselves
is illustrated by the equitable doctrine that the statute may not
be used as an instrument of fraud and that part performance
may, in some instances, place the transaction wholly outside the
statute.”®

When considered in light of these constructions, the present
memorandum is sufficient. Three of the five elements are satis-
fied on the face of the memorandum. The description of the par-

2«Void” within the meaning of the statute of frauds has been inter-
preted as voidable. Royal Realty Co. v. Levin, 244 Minn. 288, 69 N. W.
2d 667 (1955); Borchardt v. Kulick, 234 Minn. 308, 319, 48 N. W. 2d 318,
325 (1951).

See, also, Radke v. Brenon, 271 Minn. 35, 40, 134 N. W. 2d 887, 891
(1965).

506 Le

ties, the general terms and conditions of the sale, and the sub-
scriptiont of the vendors are clearly present. Only the remain-
ing two elements, description of the land and the statement of
the consideration, must rely on parol evidence and judicial no-
tice to complete their meaning.

The test for adequate description of land is stated in Miracle
Construction Co. v. Miller, 251 Minn. 320, 323, 87 N. W. 2d 665,
669 (1958):

“The description of land which a written sales contract pur-
ports to convey satisfies the statute of frauds (§ 513.05) if, in
the light of the circumstances and conditions surrounding the
parties with respect to the land during the negotiations (as es-
tablished by parol evidence or by a permissible taking of ju-
dicial notice), such description provides, when applied to the
physical features of the surrounding terrain, a reasonably cer-
twin guide or means for identifying such land to the exclusion
of all other lands. Since even the most specific and precise
description may require some parol proof to complete the identi-
fication of the property, the test is—does the writing furnish
a reasonably certain means of identification? Clearly, a descrip-
tion of land may be adequate to statisfy the statute of frauds
even though it is not so certain as to render unnecessary the
resort to extrinsic evidence to apply it to the land. If, with the
aid of extrinsic evidence, the description can be applied to the
property so as to identify and distinguish the intended area from
all other lands, it is adequate. Although parol evidence is inad-

4In Conlan v. Grace, 36 Minn. 276, 281, 30 N. W. 880, 883 (1886), this
court defined the test of adequate “subscription” as whether the offeror
intended to authenticate the document: “« * * If signed by the gran-
tee’s authority, or adopted by him as his signature, although written
by another, it is a sufficient signing by the grantor.” Accord, Radke v.
Brenon, 271 Minn. 35, 39, 134 N. W. 2d 887, 891 (1965) (“* * * A ‘sub-
scription’ is the same as a ‘signing,’ * * *.”) See, also, 2 Corbin, Con-
tracts, § 521; 4 Williston, Contracts (3 ed.) § 585; Restatement, Con-
tracts, § 210; Annotation, 171 A. L. R. 334; 34 Minn. L. Rev. 277; 16
Minn. L. Rev. 325.

Le 507

missible to aid a defective description by supplying an essential
part which is missing, it is admissible to interpret or translate
the description’s word symbols as the parties must have used
and understood them in the light of circumstances and condi-
tions which surrounded their negotiations.”

At trial all the parties agreed the subject of the sale was the
Koob farm. The parties viewed the land prior to the negotia-
tions and signed the document in the Koob farmyard. There was
no doubt between the parties as to the meaning of the “482.08”
entry on the document. Similarly, they agreed at trial that the
$157,500 figure represented the consideration. Thus, parol evi-
dence dispels any ambiguities in the document itself. The stat-
ute of frauds is satisfied.

Hl Intent to Contract

The trial court found that the Koobs entered into a contract
for the sale of the farm. Unless this finding is clearly errone-
ous, it must be upheld. Rules of Civil Procedure, Rule 52.01.
That is, the court reviewing the evidence must be left with the
definite and firm conviction that a mistake has been committed,
notwithstanding evidence to support such a finding. In re Estate
of Balafas, 293 Minn. 94, 96, 198 N. W. 2d 260, 261 (1972); In
re Trust Known as Great Northern Iron Ore Properties, 308
Minn. 221, 248 N. W. 2d 302 (1976); Bengtson v. Village of
Marine on St. Croix, 310 Minn. 508, 246 N. W. 2d 582 (1976).

It is a basic principle of contract law that parties may assent
to a contract one of the terms of which is that a later, more for-
mal evidence of it may be executed. See, e. g., Lamoreaux v. Weis-
man, 186 Minn. 207, 161 N. W. 504 (1917); Restatement, Con-
tracts, § 26. It is a question of intent. The evidence leaves little
doubt the parties intended the memorial to be binding. Both the
plaintiffs and Mr. Koob were experienced in real estate deal-
ing. The signing of the document is of special significance. Even
@ person with limited experience in such matters would attach
special meaning to the signatures of the parties. .

508 Es

Thus, the finding of a contract by the trial court is not clear-
ly erroneous.

I Signing of Contract by Mrs. Koob

The plaintiffs and Mr. Koob negotiated the terms of the mem-
orandum in the yard of the Koob farm. After each signed the
memorandum, Mr. Koob took the document into the house and
told Mrs. Koob to sign it, which she did. She did not read the
document. Mrs. Koob argues that she, by this act, did not join
in the contract. She contends that her failure to read the con-
tents of the document (and, it must be assumed, her failure to
ask her husband to explain or to read the contents of it to her)
voided her consent.

In the absence of fraud,® mistake, or unconscionable terms,®
however, a party to a contract on which others have relied can-
not avoid the duties of the document by showing he did not know
its contents. E. g., Shaughnessy v. New York Life Ins. Co. 163
Minn. 134, 203 N. W. 600 (1925); Quimby v. Shearer, 56 Minn.
584, 58 N. W. 155 (1894); 4 Dunnell, Dig. (8 ed.) § 1785; 1
Corbin, Contracts, § 107; 1 Williston, Contracts (8 ed.) § 35.
Illiteracy, as such, even if present, is not a defense. Chicago,
St. P., M. & O. Ry. Co. v. Belliwith, 88 F. 487 (8 Cir. 1897); 1
Williston, Contracts (3 ed.) § 35, p. 97 and note 19; cf., e. g., Fay
v. Buckeye Pipe Line Co. 30 Ohio App. 316, 164 N. E. 782
(1928) (eyesight impairment); Paulink v. American Express
Co. 265 Mass. 182, 163 N. E. 740 (1928) (did not understand
English).

No claim is made of fraud or mistake. The only defense is
failure to read the document. If unaware of its contents or un-
able to decipher its meaning, Mrs. Koob had ample opportunity

5 See, e. g., Marino v. Northern Pacific Railway Company, 199 Minn.
369, 272 N. W. 267 (1937).

8 See, e. g., Henningsen v. Bloomfield Motors, Inc. 32 N. J. 358, 385, 161
A. 2d 69, 84 (1960); cf. Minn. St. 336.2—302. See, also, Kessler, Contracts
of Adhesion—Some Thoughts About Freedom of Contract, 43 Col. L.
Rev. 629.

as 509

to ask an explanation of her husband or of the purchasers. She
chose not to.
Hl Morigage Tax

At trial the Koobs objected to the introduction of the memo-
randum of July 19, 1978, on the grounds that the document was
inadmissible as evidence because the plaintiffs had not paid the
mortgage registration tax pursuant to Minn. St. 287.10, which
provides:

“No such mortgage, no papers relating to its foreclosure nor
any assignment or satisfaction thereof, shall be recorded or
registered unless the tax shall have been paid; nor shall any such
document, or any record thereof, be received in evidence in any
court, or have any validity as notice or otherwise; but, if the tax
be paid, no error in computation or ascertainment of the amount
thereof shall affect the validity of such mortgage or the record
or foreclosure thereof.” (Italics supplied.)

For the purposes of the payment of the tax, contracts for deed
which give or entitle the vendee to take possession are deemed
to be a mortgage to the extent of the unpaid purchase price.”

The plaintiffs offered to pay the tax at trial when the objec-
tion was raised, but the trial court held that payment was un-
necessary. We believe the trial court was correct on the theory
that the July 19 contract is not a contract for deed, but only a
contract to enter into a contract for deed. The purpose of the
statute is to collect revenue prior to the use of the document for
recording purposes or foreclosure. If the Koobs had not breached
the agreement of July 19, a formal contract for deed would have
been executed and the tax could have been paid. The only reason
it was not was because of the actions of the defendants. The trial
court only determined a contract existed. Until that determina-

7 Minn. St. § 287.02 provides: “An executory contract for the sale of
Jand, under which the vendee is entitled to or does take possession
thereof, shall be deemed, for the purposes of sections 287.01 to 287.12,
a mortgage of the land for the unpaid balance of the purchase price.”

510 a

tion was made (or admitted by the defendants) no tax would be
due.
B. Listing Contract

The trial court found that a written listing agreement existed
between Cyril Koob and Harry Laible which provided for a 3-
percent commission, and awarded Laible $4,725 damages. On
appeal Cyril Koob argues the listing agreement was void be-
cause the title to the land was subsequently conveyed to his
brother as security for a debt. This argument is without merit.

A broker is entitled to his commission when he has performed
all that he undertook to perform. See, e. g., Goss v. Broom, 31
Minn. 484, 18 N. W. 290 (1884). The relationship is one of con-
tract. See, Olson v. Penkert, 252 Minn. 384, 90 N. W. 2d 193
(1958). To maintain a claim for his commission, a broker must
show that he has procured a purchaser at the stipulated price
and in accordance with the employment terms or that the princi-
pal has deprived him of the opportunity to do so without cause.

The following rule was given by this court in Olson v. Penkert,
252 Minn. 334, 344, 90 N. W. 2d 193, 201 (1958):

“The great weight of authority is that, unless the broker and
his employer have expressly stipulated to the contrary, the
broker is entitled to his compensation upon the completion of the
negotiations which he undertook, irrespective of whether or not
the contract negotiated is actually consummated or whether the
failure to complete the contract is due to the default or refusal
of the employer or to that of the party procured by the broker,
so long as the failure to carry it through is not due to any fault
of the broker or so long as he has not been guilty of fraud or bad
faith.” (Italics omitted.)

Koob contracted with Laible to supply a willing purchaser. The.
contract did not require, as some do, a sale to be completed be-
fore a commission is earned. See, e. g., Huntley v. Smith, 153
Minn. 297, 190 N. W. 341 (1922). Laible was the efficient cause
of bringing together the Koobs and the prospective purchasers
on terms mutually agreeable to each. The agreement was memo-

De 511
rialized in a signed writing. This is what Laible bound himself
to perform and this is what he accomplished. The sole reason the
sale was not consummated was the actions of the Koobs. This
is not a defense. As this court noted in Olson v. Penkert, 252
Minn. 334, 348, 90 N. W. 2d 193, 200 (1958) :

“We think the rule well established that, if the efforts of the
broker are rendered a failure by the fault of the employer, the
broker does not lose his commission. This rule is based wpon the
familiar principle that no one can avail himself of the nonper-
formance of a condition precedent who has himself occasioned
its nonperformance.”

Similarly, the lack of full title to the land contracted to be con-
veyed is not a defense to Mr. Koob. A principal who contracts
with a broker to secure the sale of property he does not own takes
the risk of incurring an obligation to pay a commission if the title
cannot be perfected. It is not the duty of the broker to determine
ownership unless he agrees expressly to do so. Mayberry v.
Davis, 288 Minn. 73, 178 N. W. 2d 911 (1970). The rationale is
simply that the principal is in a superior position to cure any im-
perfections. The rule applies even if the broker is aware of the
defective title. Id. Moreover, even assuming arguendo Mrs. Koob
had not signed or had refused to sign the contract for sale, the
result would be the same. It would be no defense to a suit for
commission that the eventual sale was frustrated because of the
failure or refusal of the principal’s spouse to join in the contract
of sale, Hamlin v. Schulte, 34 Minn. 584, 27 N. W. 301 (1886) ;
see, generally, Annotation, 10 A. L. R. 3d 665. The result is the
same even if the property is the homestead, Mackenzie v.
Staudenmayer, 175 Wis. 378, 185 N. W. 286 (1921).

As a second defense, Cyril Koob contends for the first time
on appeal that the listing contract was unenforceable because it
contained a provision for automatic extension in contravention
of the rules promulgated by the Minnesota Commissioner of
Securities for the regulation of real estate brokers pursuant to
Minn. St. 82.27. This issue is subject to the well-settled rule that

512 ee

an unlitigated issue may not be asserted for the first time on ap-
peal. E. g., American Surety Co. of New York v. Greenwald, 223
Minn. 37, 25 N. W. 2d 681 (1946).
C. Damages

In assessing damages the trial court set March 1, 1974, as the
date of breach of the July 19, 1978, contract because it marked
the date the plaintiffs were entitled to full possession of the
land.® Cyril Koob contends, however, that the date of the breach
was September 6, 1973, when the farm was sold to Kooiker.

The doctrine of anticipatory breach applies to contracts to con-
vey land. See, e. g., Matteson v. United States & Canada Land
Co. 103 Minn. 407, 115 N. W. 195 (1908); Annotation, 102
A. L. R. 1082; 77 Am. Jur. 2d, Vendor and Purchaser, § 518. This
court set forth the remedies available in the case of an anticipa-
tory breach in Engel v. Mahlen, 153 Minn. 1, 4, 189 N. W.- 422,
428 (1922):

«ce %* %& Tt is well settled that where one party repudiates the
contract, the other party has an election to pursue one of three
remedies: (1) to treat the contract as rescinded and avail him-
self of the remedies which may be based on a rescission; (2) to
treat the contract as still binding and wait until the time arrives
for its performance and then sue and recover under the contract;
(3) to treat the renunciation as an immediate breach and sue at
once for any damages which he may have sustained.”

The court determined the plaintiffs chose the second option
(waiting until the time of performance) and assessed damages
as of March 1, 1974.

However, the plaintiffs instituted the action on December 19,
1978, after the Koobs repudiated the contract and sold the farm
to Kooiker on September 6, 1978. It appears the date on which

8 The memorandum states “Possession—Today,” but the court con-
cluded the testimony of the parties indicated the March 1, 1974, date to
be the time of full beneficial possession and the immediate possession
provision referred only to preparing the land for the 1974 planting sea-
son, as was the custom in farm sales.

a 513

the plaintiffs treated the Koobs’ actions as a breach was
September 6, 1978, rather than March 1, 1974. Thus, the trial
court erred in setting the date of the breach. The measure of
damages for breach by the vendor of a contract to convey land
is the difference between the market value and the purchase
price at the time of the breach, September 6, 1973. Scheerschmidt
v. Smith, 74 Minn. 224, 77 N. W. 34 (1898). That is, the vendee
is entitled to the “loss of the bargain.”

D. Negligence of Real Estate Brokers

Finally, Cyril Koob argues that the real estate agents were
negligent as a matter of law. This does not merit extended dis-
cussion. The trial court found the reason for the failure to con-
summate the contract was the actions of the Koobs. Unless it can
be said this finding is clearly erroneous, the dismissal of the ac-
tions against Laible and Dowden by the trial court must be af-
firmed. See, Rule 52.01, Rules of Civil Procedure.

There must be a remand to the trial court on the question of
damages due plaintiffs. The court must find the difference be-
tween the market value of the land at the date of the breach by
defendants, namely, September 6, 1973, and the purchase price
they had agreed to pay. While the amount paid by the second
buyer (Kooiker) is properly admissible evidence of the market
value, it is not conclusive evidence, and the trial court may take
additional evidence and testimony as to true market value.

The trial court is affirmed as to the awarding of damages in
the amount of $4,725 for third-party defendant Laible, and
$5,000 for defendant Joan Kooiker, but the case is reversed and
remanded on the issue of damages to be awarded plaintiffs.

Affirmed in part, reversed in part, and remanded.

514 |

STATE v. LYNNARD HILL.

253 N. W. 2d 878.

April 8, 1977—Nos. 46238, 46623.

Thomson, Wylde, Nordby, Blethen & Peterson, Bailey W.
Blethen, and Mark W. Peterson, for appellant.

Warren Spannaus, Attorney General, William B. Randall,
County Attorney, and Steven C. DeCoster, Assistant County At-
torney, for respondent.

Defendant, Lynnard Hill, was found guilty by a jury of kid-
napping, aggravated rape, aggravated sodomy, and indecent
liberties. Defendant’s appeal is based principally on a claim of
mistaken identification and a post-trial recantation by the com-
plainant. Because we believe the evidence supports the jury’s ver-
dict and the trial court’s refusal to grant a new trial based upon
the recantation, we affirm.

On February 11, 1975, 17-year-old Susan Cummings was living
with her parents at 2004 Summit Avenue in St. Paul, but spent
the evening with a former boyfriend, Jerry Wilcox, at his apart-
ment at 1139 University Avenue. Susan, Wilcox, and two of Wil-
cox’ friends watched television and talked. After Wilcox’ friends
had left, Susan realized that she had missed the last bus on Uni-
versity Avenue and that neither she nor Wilcox had money for
a cab.

ss ‘ 515

At about 1 a. m. on February 12, Susan telephoned a friend,
Maureen Johnson, who lived several blocks north of University
Avenue on Rice Street. Susan asked if she could stay overnight
at the apartment Maureen shared with two other girls rather
than having'to walk the longer distance to her own house on
Summit Avenue. Susan suggested that Maureen and her room-
mate, Diane O’Connor, walk west on University to Dale while
Susan walked in an easterly direction on University from
Lexington so that they might meet at a midpoint. After talking
with Maureen, Susan called her parents to inform them of her
plans.

Susan decided to delay her departure for a little while to allow
her friends to get dressed. However, Maureen and Diane left im-
mediately. They walked south on Rice Street to University
Avenue and turned west on University toward Dale Street, walk-
ing on the north side of the street.

A small blue Toyota with a horizontal gold or silver stripe
stopped in front of them at a cross street and the male driver
asked for directions. Maureen and Diane ignored his request
and he drove away. A few minutes later, however, the same car
stopped again and the girls observed that it had a dim left head-
light and a “red thing” in the back window similar to a flicker-
ing light, which gave off a yellow or orange glow.

The driver, 2 young black male with a black leather coat and
a gold nightcap on his head, leaned toward the window and asked
Maureen and Diane if they needed a ride, but when they respond-
ed that they were meeting their boyfriends, he drove away.

The two girls were so frightened by this encounter that when
they reached Kent and University and did not see Susan one
block west at Dale Street, they turned around and walked back
to their apartment on Rice Street, seeing neither the blue Toyota
nor the driver again that night.

, Meanwhile, Susan Cummings, having delayed her departure,
began to walk in an easterly direction on the north side of Uni-
versity Avenue at about 1:40 a. m. As she reached a location two

516 a

blocks east of Lexington, a small blue Toyota with a gold hori-
zontal stripe on the side pulled up beside her and the driver asked
her for directions. Susan pretended that she did not hear him and
kept on walking. She began to run when she saw the car turn
north at the corner but encountered the Toyota once more as it
came around the block.

The car stopped on a side street just in front of Susan at Kent
and University. The driver got out, approached her, asked where
she was going, and offered her a ride. Susan observed that he
was a young black man, about 6 feet 5 inches tall, wearing dark
clothes, a yellow nightcap and an earring. She thought he had
“something silver” resembling an automatic pistol in his hand.

The man walked toward Susan, grabbed her by the arm and
around the neck, and dragged her into the open driver’s side of
his two-door car. Although Susan screamed, kicked, and even
struck the horn in her struggle to escape, apparently no one
heard or saw her. Her assailant threatened to “put [her] out”
if she did not cooperate.

The assailant drove about a block away to a parking lot in an
alley between Sherburne and University. There, he removed
Susan’s clothes and his own, and performed various sexual acts
upon the victim without her consent, including, as found by the
jury, the crimes of aggravated sodomy, aggravated rape, and
indecent liberties. The victim testified that she did not resist
further because of her fear of injury and because her assailant
promised to set her free if she did what he wanted.

Susan observed certain unique features of her assailant’s auto-
mobile during the period of time she was confined there. She
noticed that there were brown and white or black and white
checked bucket seats, and that there was a tape deck on the floor
beneath the front of the driver’s seat.

After Susan and her assailant dressed, he released her at
Mackubin Street between Sherburne and University, about one
block from the scene of the assault, as he had promised. As the
car drove away, Susan observed something red in the rear
window of the vehicle.

a 517

Susan ran into University Avenue and asked the driver of a
city snowplow for help and for a ride to Maureen Johnson’s
apartment on Rice Street. She arrived there at about 3 a. m., up-
set and frightened, and told Maureen and Diane of her experi-
ence. It was then that Maureen and Diane became aware that
they had encountered the same person in the blue Toyota while
they had been walking west on University to meet Susan only
a Short time before she was assaulted.

Susan was too frightened to call the police immediately, as her
friends urged her to do, but that afternoon she reported the
criminal attack. The police arrived to question Susan and then
drove her to St. Paul Ramsey Hospital.

A physical examination of the victim revealed evidence consis-
tent with forceful intercourse, and microscopic examination dis-
closed the presence of a limited number of non-motile sperm.
Scientific analysis of the victim’s blue jeans and underpants,
worn the night before, showed similar evidence.

The St. Paul police department received specific descriptions
of the assailant and of his automobile from the victim and her
two friends. The police checked with the only St. Paul Toyota
dealer, and the investigation revealed that an automobile similar
to the one described had recently been sold to one Lynnard Hill,
who lived in the vicinity of the crime. On February 18, 1975,
after police had observed the Toyota parked in front of Hill’s
residence at 880 Thomas, the victim and Diane O’Connor were
driven to the location to see if they would recognize the car. The
girls made a positive identification of the Toyota parked in front
of Hill’s house and walked by it to affirm their belief.

Subsequently, on February 19, 1975, the three girls were
shown a series of nine photographs, including one of Hill. Diane
O’Connor chose Hill’s photograph as the one most resembling
the man in the blue Toyota who had spoken to her on the night
of February 12. The other girls were uncertain of their identi-
fication of defendant based upon the photographs.

On February 22, an order was issued to arrest Hill and to im-
pound his automobile. Hill, after being taken into custody, volun-

518 Ee

tarily gave his consent to the police to search and photograph
the vehicle, acknowledging that the car was his and that no one
else had driven it. He consistently denied any connection with
the crime.

Hill was placed in a four-man lineup on February 24, 1975,
and was positively identified by Susan, the victim, as the man
who had raped her. Maureen Johnson also identified Hill as the
man who had spoken to her from the blue Toyota on the night
in question, and Diane O’Connor identified Hill, although not
positively. After the lineup, the three girls were taken to the pub-
lic safety building to view the impounded car where they posi-
tively identified it. At trial, Susan Cummings made an in-court-
room identification of Hill as the man who had attacked her, and
Maureen Johnson testified that Hill was the one who had spoken
to her from the blue Toyota. Diane O’Connor testified that she
thought the defendant was the man she had seen that night but
couldn’t be certain.

Hill continued to maintain his innocence and members of his
family testified that he had been at home after 9 p. m. on the
night in question and had been in bed asleep at the time the at-
tack occurred. Hill’s two brothers, a sister, parents, and two
friends stated that he did not own a gun, a black leather coat,
or a yellow cap and had never worn an earring. Hill also
testified to all of the above on his own behalf.

The jury nevertheless found Hill guilty of all four charges,
and this appeal followed.

1. The first question for decision is whether there was suf-
ficient evidence to identify defendant as the assailant. Defend-
ant’s theory of defense was not predicated on any contention
that the victim had not been assaulted or that she had consented
to the crimes charged, but only that he had been mistakenly
identified as her attacker. He steadfastly maintained that he was
not the perpetrator of the acts and had been at home asleep at
the time of the offenses.

The victim gave a clear and convincing description of her as-
sailant’s person as well as detailed and specific observations .of

be 519

his unique and distinctive blue Toyota with its racing stripe, tape
deck beneath the driver’s seat, checked bucket seats, and candle
on the rear window ledge. The victim, held prisoner in her as-
sailant’s car for the entire period of the assault, had ample time
to make observations and to form a mental image sufficient to
support her subsequent identification of the assailant and his
car. Moreover, her identification was buttressed by that of her
two friends, one positively as to defendant’s face observed
through the open car window, and both positively as to the un-
usually marked automobile. All three witnesses placed the vehicle
and its driver in the area of the crime within a few minutes of
its commission.

In weighing this testimony, the jury could well have con-
sidered the fact that none of the three witnesses had any motive
to fabricate and, in addition, the fact that none of the witnesses
had any prior association with defendant. The two similar and
substantially contemporaneous encounters by the assailant with
the victim and with her friends could have led the jury to con-
clude that both incidents involved the same person. The identifi-
cation was further substantiated by the witnesses’ similar obser-
vations as to the appearance of the driver and as to the make,
color, and specific details of the car. Further, it was the initial
description of this vehicle by all three young women which led
directly to the Toyota dealer and hence to the arrest and subse-
quent eyewitness identification of defendant.

Defendant argues that certain variations between the wit-
nesses’ identification testimony as to the exact color of the
checked seats or the stripe on the side of the car establish doubt
as to the identity of the assailant. However, the fact that there
might be some inconsistencies in the testimony of the state’s wit-
nesses does not preclude a conviction. State v. Senske, 291 Minn.
228, 190 N. W. 2d 658 (1971) ; State v. Poelaert, 200 Minn. 30,
273 N. W. 641 (1987). -

Identification testimony need not be positive and certain. It
is sufficient for a witness to testify that it is her opinion, belief,

520

impression, or judgment that the defendant is the person she saw
commit the crime. The factors which affect the reliability of the
testimony, such as time to observe and circumstances under
which the observation was made, go to the weight to be accorded
to such testimony by the jury and not to its admissibility. State
v. Senske, supra; State v. Burch, 284 Minn. 300, 170 N. W. 2d
543 (1969) ; State v. Ellingson, 283 Minn. 208, 167 N. W. 2d 55
(1969).

On appeal, this court is required to view the evidence most
favorable to the prosecution if it reasonably sustains the verdict
and must assume that the jury believed the state’s witnesses and
disbelieved the defendant’s contradictory testimony. State v. Vil-
lalon, 8305 Minn. 547, 234 N. W. 2d 189 (1975) ; State v. Dienger,
286 Minn. 436, 176 N. W. 2d 528 (1970). In considering the suf-
ficiency of the evidence, this court does not try the facts anew
but must painstakingly review the record to determine whether
the evidence, both direct and circumstantial, viewed most favor-
ably to support a finding of guilt, is sufficient to have allowed a
jury to reach that conclusion. State v. Ellingson, supra; State v.
Daml, 282 Minn. 521, 162 N. W. 2d 240 '(1968).

We have concluded that the state’s evidence offered by the vic-
tim, in conjunction with and corroborated by the testimony of
her two friends, is sufficient to sustain the verdict of defendant’s
guilt beyond a reasonable doubt and amply supports his convic-
tion of the crimes charged.

2. We must next decide whether the trial court improperly
refused to grant a new trial after the complainant partially re-
tracted her positive courtroom identification of the defendant.

On November 13, 1975, after his conviction, defendant moved
the trial court to vacate the conviction and to order a new trial
on the ground of newly discovered evidence. He contended that
the victim, Susan Cummings, had retracted her positive court-
room identification of defendant as her assailant. An evidentiary
hearing was held on December 5, 1975, at which Susan Cum-
mings testified concerning her alleged recantation. Defendant

I 521

argues that the trial court abused its discretion by failing to
grant a new trial in light of the victim’s purported repudiation
of her former testimony.

The trial court’s order denying a new trial included clear and
comprehensive findings that the victim’s testimony at trial had
not changed materially and that she had been subjected to a pat-
tern of pressure and harassment after the trial. The order ex-
plained in part:

“* * * In the instant situation the complaining witness,
Susan Lea Cummings, has not recanted her testimony, rather
she expressed her lack of assuredness with one facet of her
identification, that relating to the face of defendant which she
states she no longer is sure of. She says however that ‘the size,
shape and everything else about him seemed to fit.’

“In addition, at the hearing she acknowledged that at the line-
up prior to trial she was positive of her identification, and at the
trial when she identified defendant she was equally positive.
* * * Of great significance was Miss Cummings’ description
of a series of pre and post trial contacts which, she said,
brought her to the point, ‘I just want to forget this whole thing
and get it over with.” * * *

“+ * * Most particularly she related that an investigator
named John followed and questioned her, and questioned ‘many
of her friends. * * *

«*  * [T]he same man, to the best of Miss Cummings’
knowledge, went to her work and school to inquire about her. She
said that other of her friends advised her that the same man ap-
proached them regarding her, and that the inquiry continued
from the time of trial virtually to the date of the December hear-
ing. * * *

«* * * Another friend wrote to Miss Cummings about the
investigator talking to the writer regarding the witness’ char-
acter as well as the actual facts of the case. * * *

“A girlfriend of the defendant’s cousin spoke often with Miss
Cummings. [She] threatened her and said ‘that 20 years was a

522 ee

long time out of somebody’s life and how would I like 20 years
taken out of my life and stuff like that.” * * *

“Apparently, [she] was instrumental in bringing the witness —
to defendant’s attorney to make an unsworn statement in ad-
vance of the December hearing. ‘She was down there, and she
kept calling me and asking me to come down there . . . she said
that I was crazy and that somebody’s going to try to prove it or
something like that...” * * *

“* * * Friends have called her about the distributed litera-
ture printed on the defendant’s behalf * * *. One piece in par-
ticular implied that the whole claim by Miss Cummings was that
of a white woman bent on a racial attack on the defendant.
ee

“Up to the time of the hearing in December Miss Cummings
received telephone calls, day and night, wherein unidentified
people would ‘read things to me about the case that they found
out, or they would tell me something about the case that they
heard .. 7 * * *

“Also, a few telephone calls came to her at night, awakening
her, with people screaming at her or making threatening sounds
towards her. * * *”

Based on these facts, the trial court concluded:

“This Court is not reasonably convinced that the witness has
recanted or that a jury would reach a verdict different than that
rendered in May of 1975. Accordingly, defendant’s motion for
a, new trial is denied.”

In Whelan v. State, 298 Minn. 545, 214 N. W. 2d 844 (1974),
we set forth a two-pronged test for the determination of whether
a new trial should be granted when a victim purportedly recants
trial testimony:

“The rule in cases of this sort is that the trial court should
grant the defendant a new trial if (a) the defendant has acted
with due diligence in seeking a new trial and (b) the court is rea-
sonably convinced that the witness has indeed recanted and that
without this witness’ perjured testimony at trial the jury might

be 523

well have reached a different verdict. See, Minn. St. 547.01 (4) ;
State v. Klotter, 274 Minn. 58, 142 N. W. 2d 568 (1966) ; State
v. Wheat, 166 Minn. 300, 207 N. ‘W. 628 (1926). See, also, Lar-
rison v. United States, 24 F. 2d 82 (7 Cir. 1928); 24 C.J. 8,
Criminal Law, § 1454(k).”

Courts have traditionally looked with disfavor on motions for
a new trial founded on alleged recantations unless there are ex-
traordinary and unusual circumstances. See, State v. Arradondo,
260 Minn. 512, 110 N. W. 2d 469 (1961); Annotation, 158 A. L.
R. 1062. This rule is particularly relevant where possible changes
in testimony have been occasioned by threats, pressure, and in-
timidation. State v. Mastrian, 285 Minn. 51, 171 N. W. 2d 695
(1969) ; State v. Thompson, 273 Minn. 1, 189 N. W. 2d 490 (1966).
Where the “newly discovered” evidence is of doubtful character
and the particular circumstances of a case do not lend credence
to the appellant’s claim, we will not hold that the trial court
abused its discretion in denying a motion for a new trial. State

v. Wofford, 262 Minn. 112, 114 N. W. 2d 267 (1962).

We hold, under all of the circumstances, that the trial court
did not abuse its discretion in its denial of defendant’s motion
for a new trial.

3. Defendant claims that certain statements by the prosecu-
tor in his final argument were improper and prejudicial, and re-
quire a new trial. Included in the state’s final argument were the
following remarks:

«x * * [Rieasonable doubt is a subjective standard. * * *
[While it is the duty of you to give the defendant the benefit
of every reasonable doubt, don’t search for doubt search for the
truth. * * * Don’t use the proof beyond the reasonable doubt
requirement to avoid the performance of a disagreeable duty.
eee

+ ££ & ee
“Now, the defendant is presumed to be innocent just as every
defendant in every criminal case is, but the presumption of in-
nocence is the presumption for the innocent, it’s not a cloak that

524 Dh
the guilty can hide behind, and when the State has proven its
case, if you find that to be the case when you get to the jury
room, you'll find that cloak falls and disappears. It’s not some-
thing the guilty can hide behind. * * *

«x * * [TM ]y duty is not to convict but to see or attempt to
see justice done; while Mr. Peterson on his client’s ‘behalf has
no interest whatsoever in having «a guilty verdict returned at all.”
(Emphasis supplied.)

Defendant submits that these remarks invited the jury to
ignore the essential principle of proof beyond a reasonable doubt
and misrepresented his constitutional protection of the presump-
tion of innocence. Moreover, defendant argues that these com-
ments belittled the role of his defense attorney while attempting
to enhance the role of the prosecutor in the eyes of the jurors.

We have addressed the issue of prosecutorial misconduct in
two recent cases, State v. Thomas, 307 Minn. 229, 289 N. W. 2d
455 (1976), and State v. Jensen, 308 Minn. 377, 242 N. W. 2d 109
(1976). In Thomas the prosecutor had stated, among other
things, that “[constitutional safeguards] are meant to protect
the innocent, not to shield the guilty.” 307 Minn. 230, 239 N. W.
2d 456. While we affirmed the conviction, we stated in regard
to this sort of argument:

«% * * [T]he prosecutor argued that the presumption of in-
nocence and the requirement of proof beyond a reasonable doubt
are meant to protect the innocent not to shield the guilty, a
proposition which we disapproved 48 years ago in State v. Bauer,
189 Minn. 280, 284, 249 N. W. 40, 42 (1938), * * *.

ee ke OK

“Our admonition in the Bauer case having gone unheeded by
prosecutors, we now hold that henceforth it will be grounds for
reversal for the court to charge or the prosecutor to argue that
a defendant’s constitutional rights ‘are meant to protect the in-
nocent but not to shield the guilty.” ” (Emphasis supplied.) 307
Minn. 231, 289 N. W. 2d 457.

The prosecutor’s comments in this case that the presumption
of innocence was a shield for the innocent and not a cloak to hide

bel 525

the guilty were very similar to those in State v. Thomas. We
again express our belief that remarks of this kind are improper
and inappropriate. However, the instant case was tried prior to
the issuance of our opinion in the Thomas case, and no objection
was made to the argument at trial. Further, there is ample evi-
dence to support the jury’s verdict.

While we continue to disapprove of this form of argument,
and intend to implement our holding in Thomas, we have con-
cluded that the prosecutorial misconduct did not play a substan-
tial part in influencing the jury to convict and, indeed, was harm-
less beyond a reasonable doubt. State v. Caron, 300 Minn. 123,
218 N. W. 2d 197 (1974), Therefore, it would be inappropriate
to reverse the jury’s verdict in this case based upon the final
argument of the prosecutor.

4. The defendant contends that the trial court should have
admitted testimony based upon results of a polygraph examina-
tion administered to him. In State v. Goblirsch, 309 Minn. 401,
407, 246 N. W. 2d 12, 15 (1976), a case in which we were urged
to reverse because of failure to admit evidence of a polygraph
test, we observed:

“«* * * Defendant urges that this court now reconsider the
rule of inadmissibility set down in these earlier cases. We decline
to do so in this case because of the prosecution’s nonparticipa-
tion, and because we are not persuaded that the reliability of
polygraph evidence has improved sufficiently in recent years
to warrant reversing these prior decisions or questioning their
rationale.”

Here, as in Goblirsch, there was no stipulation by or participa-
tion of the prosecution, nor even a prior offer to take such a test
to be administered by the state. Therefore, defendant’s request
for the admission of this evidence was properly denied.

Defendant also argues that the trial court erred in refusing
to grant a mistrial based upon alleged jury misconduct. We have
carefully considered this claim and find it to be totally without
merit.

Affirmed.

526 Ee

HERSCHEL WOLPERT, INDIVIDUALLY AND dba.
SALES ENTERPRISES, v. CHARLES R.
FOSTER AND ANOTHER.

254 N. W. 2d 348,

April 15, 1977—No, 46556.

Nielsen, Blackburn & Merritt and Steven J. Tierney, for appel-
lants.

es 527

Maslon, Kaplan, Edelman, Borman, Brand & McNulty and
Charles Quaintance, Jr., for respondent.

Heard before Rogosheske, Kelly, and Todd, JJ., and considered
and decided by the court en banc.

KELLY, JUSTICE.

Defendants appeal from a judgment of the Hennepin County
District Court entitling plaintiff to recover damages arising
from a contractual relationship with defendants. We affirm in
part and reverse in part.

Plaintiff, Herschel Wolpert, was the sole proprietor of Sales
Enterprises for the years in question, 1967 to 1970. The princi-
pal business of Sales Enterprises was the sale of fishing equip-
ment to distributors and retail outlets. Defendant Charles R.
Foster was the owner of defendant Strike Master, Inc., a con-
cern whose principal business was the manufacture and sale of
terminal fishing tackle and ice fishing equipment to wholesalers
and major chain stores. Defendant! in 1967 was having financial
difficulties and the parties worked out a two-part arrangement
to aid him. The arrangement was intended to be temporary only,
put no suitable permanent financing was discovered. The first
part was a lending agreement, wherein defendant would assign
his accounts receivable to plaintiff in exchange for a cash loan
equalling an agreed percentage of the amount of the invoice. The
second method of providing financial] assistance is the focus of
this appeal.

Defendant was having difficulty obtaining credit from sup-
pliers. Plaintiff offered to use his cash or credit to purchase
merchandise defendant desired; defendant, in turn, agreed to
purchase those goods from plaintiff. The contract price was to
pe plaintiff’s cost, plus a markup of 10 percent for domestic and
20 percent for foreign merchandise, unless otherwise agreed.
Payment originally was intended to be in cash or merchandise,

1 Hereinafter “defendant” refers as a matter of convenience to both
defendants, unless otherwise noted.

528 Le

but plaintiff gradually permitted defendant to make an increas-
ing number of purchases from him on unsecured credit, on a so-
called “open account.” Plaintiff charged no interest on this
account, because the markup charged defendant for the merchan-
dise was in part to cover the cost of money and because the
parties did not anticipate that large amounts of credit would be
involved.

In 1969, however, the amount of credit extended to defendant
on the open account had grown to $55,000. Plaintiff was also con-
cerned because he discovered defendant had diverted some
$32,000 in receipts from him in connection with the first part
of the arrangement. Thus, in the fall of 1969, plaintiff advised
defendant that if the parties were to continue to do business,
plaintiff would charge defendant interest at the rate of 1 percent
per month on the unpaid open account balance, commencing in
January 1970. No agreement was reached, but defendant con-
tinued to deal with plaintiff through July 1970, when defendant
arranged alternative financing.

On July 24, 1970, defendant terminated the arrangement.
Plaintiff held inventory he had purchased for defendant at a cost
of $19,055.08, He offered to sell it en masse to defendant at cost
plus markup, but refused to permit defendant to purchase only
the most desirable items. When the parties could not agree as
to disposition of the inventory, plaintiff undertook to minimize
his damages by selling or using it. Some of the inventory plain-
tiff used as components for his own products; some of it he sold
in the regular course of his business or at cost or on a distress
sale basis. The inventory consisted of thousands of items, dis-
posed of in a multitude of transactions. By the time of trial he
had reduced the inventory to items that he could not dispose of
and that had a cost to him of $4,703.43, and had a contract price
to defendant of $5,515.56. As of July 31, 1970, the open account
had a principal balance of $21,817.50. By the time of trial, sur-
plus monies received from the assigned account receivables re-
duced the balance to $12,886.59.

es 529

Plaintiff commenced the instant action in May 1971 to recover
the principal and interest on the open account and the contract
price for the remaining inventory. Sitting without a jury, the
trial court found in plaintiff’s favor. Defendant appeals from
the judgment and challenges the award of interest and of the con-
tract price for the remaining goods. .

Plaintiff brought this action for the price of the remaining
inventory under Minn. St. 336.2—709. That section provides in
part:

“(1) When the buyer fails to pay the price as it becomes due
the seller may recover, together with any incidental damages
under the next section, the price

* £ #  &

“(b) of goods identified to the contract if the seller is unable
after reasonable effort to resell them at a reasonable price or the
circumstances reasonably indicate that such effort will be un-
availing.

“(2) Where the seller sues for the price he must hold for the
buyer any goods which have been identified to the contract and
are still in his control except that if resale becomes possible he
may resell them at any time prior to the collection of the judg-
ment. The net proceeds of any such resale must be credited to
the buyer and payment of the judgment entitles him to any goods
not resold.”

Plaintiff holds the remaining goods for delivery to defendant
upon payment of the contract price. Defendant concedes the
goods have been identified to the contract and does not challenge
the reasonableness of plaintiff’s efforts to resell the remaining
inventory. Instead, defendant contends that plaintiff has failed
to adequately credit under § 336.2—709 (2) the part of the inven-
tory that plaintiff was able to resell, because those resales did
not comport with Minn. St. 336.2—706.? It should be noted that

2 Section 336.2—706 provides in part: “(1) Under the conditions stated
in section 336.2—703 on seller’s remedies, the seller may resell the goods
concerned or the undelivered balance thereof. Where the resale is made

530

plaintiff is not seeking damages with respect to that part of the
inventory which has been resold. The trial court found that plain-
tiff “neither made nor lost any substantial amount of money”
on the resales. Our perception of the evidence similarly reveals
that the net proceeds from the resales were less than the contract
price for those goods. :

We find that § 886.2—709 does not incorporate the resale re-
quirements of § 336.2—706. The Uniform Commercial Code
makes it clear that a seller’s remedies are cumulative. U. C. C.
Comment 1, 21A M.S. A., § 336.2—708. A resale of goods con-
forming to the. requirements of § 836.2—706 entitles a seller to
damages measured by the resale price. Minn. St. 836.2—706(1).
A resale failing to conform to these requirements may relegate
the seller to measurement of his damages based on the market
price at the time and place of tender. U. C. C. Comment 2, 21A
M.S. A., § 836.2—706; Minn. St. 336.2—708(1) ; Miller v. Belk,
23.N.C. App. 1, 207 S. E. 2d 792 (1974). An action for the price
arises in this situation only when reasonable resale efforts do

in good faith and in a commercially reasonable manner the seller may
recover the difference between the resale price and the contract price
together with any incidental damages allowed under the provisions of
this article (section 336.2—710), but less expenses saved in consequence
of the buyer’s breach.

“(2) Except as otherwise provided in subsection (3) or unless other-
wise agreed resale may be at public or private sale including sale by
way of one or more contracts to sell or of identification to an existing
contract of the seller. Sale may be as a unit or in parcels and at any
time and place and on any terms but every aspect of the sale including
the methods, manner, time, place and terms must be commercially rea-
sonable. The resale must be reasonably identified as referring to the
broken. contract, but it is not necessary that the goods be in existence
or that any or all of them have been identified to the contract before
the breach.

“(8) ‘Where the resale is at private sale the seller must give the buy-
er reasonable notification of his intention to resell.”

Plaintiff failed to notify defendant of his intention to resell the goods
and failed to identify the resales as referring to the broken contract.

Es - 581

not dispose of the goods.* It is a remedy distinct from an action
for damages under § 336.2—706 or § 336.2—708, and thus we
would hesitate to incorporate the requirements of § 336.2—706
with respect to the goods that have been sold as a prerequisite
for maintaining an action under § 336.2—709 for the price of the
remaining goods. Minn. St. 8336.2—709 confirms our conclusion.
It mandates crediting resale proceeds only of goods still held for
the buyer at the time of suit and not of goods amenable to sale
by reasonable efforts and for which no action for the price would
lie. Minn. St. 386.2—709(2): “* * * The net proceeds of any -
such resale * * *”, (Italics supplied.) Because the trial court
found that plaintiff handled the resold goods in a commercially
reasonable manner and because plaintiff’s net proceeds from the
resale were less than the contract price for the items, no factor
appears in the instant case to alter our conclusion.*

In sum, plaintiff resold some of the goods identified to the con-
tract but decided not to seek damages with respect to those goods.
Instead, he sought to recover the contract price for the goods he
could not resell. He has satisfied the requirements of § 336.2—
709 and is entitled to the contract price, even though he failed
to comply with the requirements § 336.2—-706 imposes on an ac-
tion to recover damages measured by the resale price. Thus, the
trial court’s judgment in this respect is affirmed, and defendant

3 An action for the price also may be maintained where the goods are
accepted by the buyer or where conforming goods are lost or damaged
within a commercially reasonable time after risk of their loss has
passed to the buyer. Minn. St. 336.2—709(1) (a).

4 We intimate no opinion on the circumstances where a seller’s resale
of part of the goods nets him more than the contract price for those
goods, and he then brings an action for the price of the remaining
goods. We note in passing that Minn. St. 336.2—706(6) provides that
“[t]he seller is not accountable to the buyer for any profit made on any
resale,” but that Minn. St. 336.1—106(1) provides that “[t]he remedies
provided by this chapter shall be liberally administered to the end that
the aggrieved party may be put in as good a position as if the other
party had fully performed * * *.” See, also, Akron Brick & Block Co,
v. Moniz Engineering Co. Inc, 365 Mass, 92, 310 N. B. 2d 128 (1974).

532 EE

is entitled to the goods in plaintiff’s possession upon payment
of the contract price.®

I Defendant also challenges the amount of interest awarded
by the trial court on the open account. It is well settled that an
agreement to modify a written contract may be found in conduct
on the part of the offeree, e. g., Mitchell v. Rende, 225 Minn. 145,
30 N. W. 2d 27 (1947), and the trial court’s finding that an im-
plied agreement to pay interest arose from defendant’s continued
dealings with plaintiff is not clearly erroneous. The rate of inter-
est for which defendant is liable, however, is a more difficult
question.

Mi Plaintiff informed defendant that a condition of their con-
tinued contractual relationship would be an interest charge of
1 percent per month. No writing evidenced this rate. Defendant
relies on Minn. St. 834.01, subd. 1, which requires:

“The interest for any legal indebtedness shall be at the rate
of $6 upon $100 for a year, unless a different rate is contracted
for in writing ; and no person shall directly or indirectly take or
receive in money, goods, or things in action, or in any other way,
any greater sum, or any greater value, for the loan or forbear-
ance of money, goods, or things in action, than $8 on $100 for
one year; and, in the computation of interest upon any bond,
note, or other instrument or agreement, interest shall not be com-
pounded, but any contract to pay interest, not usurious, upon
interest overdue, shall not be construed to be usury * * *.”
(Italics supplied.)
Defendant argues that the first clause limits his liability for
interest to 6 percent since the modification of the contract was
not in writing. Plaintiff responds that, since defendant Strike
Master, Inc., is a corporation and since defendant Foster per-
sonally guaranteed Strike Master’s obligations, Minn. St. 334.021
precludes defendant from interposing this statute. Dahmes v.

5 The judgment of the lower court did not provide that defendant is

entitled to the remaining goods upon payment of the contract price. It
should be amended accordingly.

a 533

Industrial Credit Co. 261 Minn. 26, 110 N. W. 2d 484 (1961);
Charmoll Fashions, Inc. v. Otto, 311 Minn. 218, 248 N. W. 2d
717 (1976). Minn. St. 334.021 provides in part: “No corporation
shall hereafter interpose the defense of usury in any action.”
Thus, the determinative issue is whether defendant’s raising of
§ 384.01 is a “defense of usury” within the meaning of § 334.021.¢

We conclude that the requirement that interest charges dif-
ferent than 6 percent be in writing is not a usury defense. If an
oral contract providing for more than 6 percent was usurious,
it would be void under Minn. St. 334.03.7 But the cases dealing
with oral contracts for interest allow enforcement of the obliga-
tion up to the statutory rate, now 6 percent. Staughton v. Simp-
son, 72 Minn. 536, 75 N. W. 744 (1898) ; Swank v. G. N. Ry. Co.
63 Minn. 258, 65 N. W. 452 (1895). See, also, Allen v. Jones, 8

6 Defendant advances another argument to reduce the amount of
interest awarded, citing Bell v. Mendenhall, 78 Minn. 57, 80 N. W. 843
(1899), for the proposition that no interest is to be charged on an open.
account until the last item is debited and due and the amount thus
liquidated. This proposition slightly misstates the case. In Mendenhall,
the court dealt with two open accounts and held that an implied agree-
ment to pay the legal rate of interest arose only from the date of the
last payment on the account. The court stated:

“x * * Tt is probably the law that an account consisting of items of
debit and credit is an unliquidated, running account, which will not
carry interest, without an agreement express or implied. But, from the
time of the last item on the debit side of such an account, it must be re-
garded as closed, and that there is an implied agreement to pay inter-
est on the balance due thereafter.” 78 Minn. 67, 80 N. W. 845. (Italics
supplied.)

Tm any event, the case is inapposite here since an agreement to pay
interest exists.

7 See, also, Minn. St. 334.01, subd. 2: “A contract for the loan or for-
bearance of money, goods, or things in action, in the amount of $100,000
or more, shall be exempt from the provisions of this section and the
interest for such an indebtedness shall be at the rate ‘of $6 upon $100
for a year, unless a different rate is contracted for in writing. * * *”
“(T]he provisions of this section,” arguably the usury provisions of
§ 834.01, must not include the provision here in question for it is reiter-
ated,

5384 ee

Minn. 172 (202) (1863). This proposition was explicitly recog-
nized in Blindman v. Industrial L. & T. Corp. 197. Minn. 93, 98,
266 N. W. 455, 457 (1936) :

“The very first clause of [the predecessor to Minn. St. 334.01]

seems applicable. It provides that the interest rate for any legal
indebtedness shall be at the rate of $6 upon $100 per year, unless
a different rate is contracted for in writing. Accordingly, this
court held in Swank v. G. N. Ry. Co. 63 Minn. 258, 65 N. W. 452,
and again in Staughton v. Simpson, 72 Minn. 536, 75 N. W. 744,
that any oral promise or agreement for interest in excess of six
percent per annum is invalid as to the excess. These cases did
not involve claims of usury, but the. holdings are based on the
provisions of [the predecessor to Minn. St. 334.01].” (Italics sup-
plied.)
The instant case differs from these cases in that here plaintiff
attempted to charge a rate of interest (12 percent) greater than
that allowed by law even if contracted for in writing (8 percent).
This difference, however, does not blur the distinctions between
the evidentiary writing requirement and the public policy judg-
ment that 8 percent is the ceiling for fair interest rates.

It is true, as plaintiff argues, that courts liberally construe,
as being restorative of the common law, statutes disqualifying
corporations from raising a usury defense. Bichel Optical Lab.,
Inc. v. Marquette Nat. Bank of Mpls. 3386 F. Supp. 1868, 1869
(D. Minn. 1971), affirmed, 487 F. 2d 906 (8 Cir. 1978); An-
notation, 68 A. L. R. 2d 924. The fact that the provision in ques-
tion lies within the usury statute does not alone render it a “de-
fense of usury,” even with a liberal construction of that phrase.
Requiring a written contract for provision of more than 6 per-
cent interest does not appear to fall within the relevant policy
basis for the corporation disqualification statute, that “usury
laws * * * increase the value of money and are restraints on the
natural flow and supply of capital to the prejudice of industry
and commerce.” Carozza v. Federal Finance Co. 149 Md. 223, 250,
181 A. 332, 342 (1925). Therefore, the trial court erred in award-

es 585

ing plaintiff interest calculated at a 12-percent rate. Plaintiff
is entitled to only 6-percent interest on the unpaid balance of the
open account from January 1970. But for this modification, and
the modification of the judgment to entitle defendant to the re-
maining goods upon payment of the contract price, the judg-
ment of the trial court is affirmed.

Affirmed in part and reversed in part.

a
LYLE CZECH v. CITY OF BLAINE.
253 N. W. 2d 272,

April 15, 1977—No. 46481.

P|
Sweeney & O’Connor and Thomas M. Sweeney, for appellant.
Wurst, Bundlie, Carrolt & Crouch, Gerald T. Carroll, Jr., and
Albert Faulconer III, for respondent.

Heard before Rogosheske, Kelly, and Todd, JJ., and considered
and decided by the court en banc.

Topp, JUSTICE.
Respondent Lyle Czech is the owner of a mobile home park

536

in the city of Blaine. In 1978 he acquired property immediately
adjacent to his site and sought a special-use permit to use the
acquired site as a mobile home park. He obtained all necessary
preliminary approvals, but at a meeting of the Blaine City Coun-
cil he discovered that the Blaine ordinances required rezoning.
Czech applied for rezoning, obtained all preliminary approvals,
but his application for rezoning was rejected. Czech commenced
action against Blaine alleging the action of the city council was
capricious and illegal, and challenging the constitutionality of
Blaine Ordinance No. 163. The trial court held the ordinance un-
constitutional, treated the matter as an application for a special-
use permit, and ordered Blaine to issue such a permit. We decline
to affirm on the grounds stated by the trial court, but do conclude
that Blaine’s refusal to rezone constituted an unconstitutional
taking of Czech’s property under the facts of this case.

In 1970, Czech purchased a parcel of land in Blaine. Since the
land was zoned B-3, he operated a mobile home park on the prop-
erty by virtue of a special-use permit obtained ‘by the preceding
owner. Thereafter, Czech acquired additional property immedi-
ately west of his present mobile home park which was also zoned
B-8. Czech purchased the property for the specific purpose of
expanding his mobile home park on the new site. He contacted
the city building inspector who informed him that a special-use
permit would have to be obtained in order to operate a mobile
home park on the acquired site. Czech completed a special-use
permit application and submitted it to the planning commission
in July 1973. The application was accompanied by all the data
required by Blaine city ordinances and included approval of the
application by the police and fire departments as well as the
watershed district. The only person to voice an objection to
Czech’s permit request at a September 1978 public hearing was
the mayor of Lexington, a neighboring community of Blaine. His
objection to Czech’s application related to the capacity of the
sewer line which would service the trailer park. Despite the
objection, the planning commission unanimously approved the
application in a subsequent meeting.

a 587

The Blaine City Council held a public hearing on Czech’s appli-
cation on December 6, 1973. At this hearing a person in the audi-
ence called the city council’s attention to the fact that the Blaine
City ordinances were amended in 1968 to establish an R-4 dis-
trict for mobile home parks in the city. However, in December
1973, every mobile home park in the city was located in a B-3 dis-
trict and operated by virtue of a special-use permit. Also, at the
time of Czech’s hearing there was not one parcel of land within
the city zoned as R-4.1 In reaction to the information it received
concerning the 1968 amendment, the council declined to act on
the application for a special-use permit.

In response to the inaction of the city council, Czech immedi-
ately completed and filed a petition to rezone his new site from
B-3 to R-4. He again appeared before the planning commission
with all the necessary data and approvals. At this public hear-
ing no one appeared in opposition to his application. On January
17, 1974, Czech once again found himself in front of the Blaine
City Council where his petition to rezone the property was denied
by a three-to-one vote, with one abstention. No reasons were
stated for the denial, but the minutes of the meeting reflect a con-
cern over sewer capacity. Czech’s attorney appeared at a March
1974 meeting of the council where the minutes state that two of
the three councilmen voting against the rezoning stated their
reasons for denying approval.

Shortly thereafter, Czech brought action against the city of
Blaine seeking in the alternative (1) that Ordinance No. 163,
which amended the Blaine city zoning ordinance and established
R-4 districts for mobile home parks, be declared unconstitu-
tional; (2) that the city be ordered to rezone his property from
B-3 to R-4; or (8) damages.

At trial, the evidence disclosed that the subject site is located
in an area of high water tables. The property is bounded on the
east by Czech’s present mobile home park and on the west by an-

1 Subsequent to this litigation, Blaine rezoned all the existing mobile
home park property from B-3 to R-4.

538 ee

other trailer park. The city of Lexington abuts the south side of
the property while the land north of the subject site is zoned for
multiple dwelling and light industry. A judicial ditch runs be-
tween Czech’s present mobile home park and his proposed site
to provide for drainage of surface waters.

The city council members were called as witnesses in the trial.
Two of the members who voted to deny rezoning gave as reasons
for their vote the problems of (1) the high water table; (2) the
sewer capacity; and (8) surface water drainage. Although ad-
mitting to have read professional engineering reports which
were contradictory to their position, they nevertheless relied on
their personal judgment and observation concerning the site to
reach the conclusion that the sewer and drainage capacities were
inadequate to accommodate another trailer park. The third coun-
cil member, who voted in opposition to the rezoning applica-
tion, testified that he was fundamentally opposed to the expan-
sion of mobile home parks within the city. The member who ab-
stained from voting related that because he was a newly elected
member on the city council he did not possess adequate informa-
tion upon which to base an opinion on the matter. Finally, the
mayor, who cast the only affirmative vote, testified that since
the operation of a mobile home park is the only reasonable use
of the property, rezoning should have been allowed.

The trial court made findings of fact, conclusions of law, and
ordered judgment for plaintiff which provided in part:

“That Plaintiff is entitled to the judgment of this Court as fol-
lows:

“a, Declaring Blaine City Ordinance No. 163 and the accom-
panying scheme of zones in effect in Blaine during the period
from September 5, 1968 to December, 1974, to be null and void
and of no force and effect for said period, insofar as said Ordi-
nance and scheme prohibited construction of mobile home parks
in the City of Blaine.

“b. Ordering that the City Council of the City of Blaine, Min-
nesota should and shall forthwith cause to be issued to Plaintiff

Ee 539

a special use permit, a building permit and such other authoriza-
tion as may [be] required for construction and operation by
Plaintiff, upon the premises in question, of an addition to Plain-
tiff’s existing mobile home park in accordance with the plans
and specifications heretofore approved, on September 8, 1974,
by the Planning and Zoning Commission of the City of Blaine.”

We fail to perceive the reasons for such a broad application
of the facts in this case. Rather, we regard this casé as involving
a rezoning application under a valid ordinance. When a city coun-
cil acts on a rezoning application, it exercises a legislative power.
Judicial review of a legislative body’s determination is neces-
sarily narrow. In order to successfully challenge a city council
decision when it acts within its legislative capacity, proof must
be submitted to affirmatively establish either an unconstitutional
taking or an action in excess of the powers delegated to the legis-
lative body. Sun Oil Co. v. Village of New Hope, 300 Minn. 326,
334, 220 N. W. 2d 256, 261 (1974).

After reviewing the record we conclude that the proper issue
for determination in this case involves the question of an un-
constitutional taking. U. S. Const. Amend. V; Minn. Const. art.
1, § 7. For there to be an unconstitutional taking a landowner
must demonstrate that he has been deprived, through govern-
mental action or inaction, of all the reasonable uses of his land.
C. F. Lytle Co. v. Clark, 491 F. 2d 834, 888 (10 Cir. 1974) ; County
of Freeborn v. Claussen, 295 Minn. 96, 203 N. W. 2d 828 (1972) ;
see, generally, Freeman, Give and Take: Distributing Local En-
vironmental Control Through Land-Use Regulation, 60-Minn.
L. Rev. 883.

The record includes all the facts necessary to dispose of the
singular issue of an unconstitutional taking which should have
been the basis of the trial court’s decision. The trial court made
the following findings of fact which are not clearly erroneous
and are amply supported by the evidence:

“That no substantial evidence to support a claim that the pub-
lic health, safety or welfare of the residents of the City of Blaine

540 ee

was endangered by Plaintiff’s requested use, was presented at
either the aforementioned hearing on Plaintiff’s application for
a special use permit on December 6, 1973, or the hearing on
Plaintiff’s application for rezoning on January 17, 1974.

“That the only reasonable and economical use of the subject
tract is for use as a mobile home park.

“That the tract in question is extremely flat, comprised of
sandy soil, and possessing a water table estimated to be three
or four feet below the surface, making construction of single
family dwellings with basements impossible, and eliminating
the possibility of any commercial or industrial business buildings
of any size.

“That the subject tract is bounded by mobile home parks on
the west and east. That most of the property immediately to the
north of the subject tract is zoned industrial.

“That the sanitary sewer presently existing in Restwood Road
has sufficient capacity to handle the proposed mobile home park
expansion.

“That Judicial Ditch No. 1, bisecting the Plaintiff’s property
between the existing park and the proposed expansion area, is
adequate to handle surface water runoff from the park proposed
by Plaintiff.”

A thorough consideration of the entire record, together with
the trial court’s findings, mandates a conclusion that the denial
of Czech’s petition to rezone the subject site from B-3 to R-4 for
use as a mobile home park was an unconstitutional taking of
his property. The general characteristics of the property, includ-
ing the high water table and the general nature of the terrain,
virtually render it useless for any other use than a site for a
mobile home park. Further, the evidence compels a finding that
the public health, safety, and welfare will not be endangered by
such a development on the property. The denial of rezoning under
the facts of this case permits judicial intervention to protect the
rights of the property owner. Pearce v. Village of Edina, 263
Minn. 558, 118 N. W. 2d 659 (1962).

as 541

Thus, we hold that the failure of the Blaine City Council to
grant Czech’s rezoning request was an unconstitutional taking
of his property. The judgment of the lower court is vacated and
the matter remanded to the district court with instructions to
enter judgment consistent with this opinion.

a
QUENTIN RAWLEIGH SMITH v. ROBERTA SMITH.

253 N. W. 2d 143.

April 15, 1977—No. 46583.

542

D. Patrick McCullough, for appellant.
Gray, Plant, Mooty & Anderson and James R. Lande, for re-
spondent.

Heard before Todd, MacLaughlin, and Stabler, JJ., and con-
sidered and decided by the court en banc.

Tuomas J. STAHLER, JUSTICE.*

Plaintiff, Quentin Rawleigh Smith, appeals from a judgment
of the district court ordering him to transfer certain assets held
in trust to defendant, Roberta Smith, his former wife. We af-
firm.

The parties to this action were divorced pursuant to a stipu-
lated settlement on December 27, 1971. The divorce decree
awarded defendant custody of the three minor children of the
parties, certain property of plaintiff, and child support and ali-
mony. Among the assets awarded defendant was a portion of
plaintiff’s interest as beneficiary of a spendthrift trust, to be
transferred to defendant upon plaintiff’s attaining the age of
45,

The trust at issue is an inter vivos trust created by instrument
dated December 22, 1941. The settlor, Minnie B. Rawleigh, was
at that time a resident of Illinois. The First National Bank of
Chicago was named trustee. The instrument provided that the
trust fund be divided into two trusts of equal value for the sepa-
rate benefit of the settlor’s two daughters. The net income of the
trusts was to be paid to the daughters during their lifetimes, and
upon the death of either daughter, the remainder of her trust
would go to her children per stirpes. Hach child of a deceased
daughter of the settlor was to be given a separate trust and
would have the right to withdraw up to one-third of the principal
after reaching age 35, two-thirds after age 40, and all after age
45.

Plaintiff, one of the settlor’s grandchildren, was 42 years old
at the time of the divorce. He had at the time of the stipulation

*Acting as Fustice of the Supreme Court by appointment. pursuant
to Minn. Const. art. 6, § 2, and Minn. St. 2.724, subd..2. - .

Py 543
the unqualified right to withdraw an amount sufficient to satisfy
the award to defendant in the divorce decree.

Following the divorce, the parties had numerous disagree-
ments over child support and other matters which, although set
forth in plaintiff’s brief, are not issues before this court. Plain-
tiff failed to request withdrawal and transfer to defendant of
any portion of the trust assets upon reaching age 45. Defendant
then brought a motion for an order compelling plaintiff to re-
quest the trustee to pay defendant her award pursuant to the
divorce decree and for other relief. The referee entered a deci-
sion favorable to defendant and plaintiff appealed to the district
court. The district court affirmed, reasoning that Illinois law
applied and that under Illinois law a spouse’s claim for alimony,
child support, and property division defeats a spendthrift provi-
sion in a trust.

HM Plaintiff admits that he freely entered into the stipulation
as part of the property settlement between himself and defend-
ant. He further admits that at the date of the stipulation he had
the unqualified right to request of and to receive from the trustee
more than sufficient assets of the trust to satisfy the require-
ments of the stipulation relating to the portion of the trust he
agreed to assign to the defendant. However, he now takes the
position that he has the legal right to refuse to make written re-

1The relevant portion of the divorce decree provides: “That at plain-
tiff’s age 45, or at such time as the plaintiff shall first have the right
to withdraw funds from the Minnie B. Rawleigh Trust under Agree-
ment dated December 22, 1941, the plaintiff shall forthwith determine
the amount of taxes that will accrue from the sale of securities held in
said Minnie B. Rawleigh Trust; determine further one-half the amount
of any tax attributable to the sale of securities from the Northwestern
Natonal Bank of Minneapolis Trust, to accomplish the purposes of this
decree herein; and after deducting said taxes plus $28,000.00 from the
total amount of said Minnie B. Rawleigh Trust, pay over to the defend-
ant one-third of the remainder as a further property settlement herein.”

Although the provisions of the decree are unclear, plaintiff has con-
ceded for purposes of this appeal that he could have withdrawn an
amount sufficient to satisfy the award at the time of the divorce.

544 a

quest to the trustee for withdrawal and transfer of the trust as-
sets, which would facilitate and accomplish the terms of the
stipulation. Plaintiff attempts to hide behind the spendthrift pro-
visions of the trust instrument as a legal justification for his
position.

We find it unnecessary to determine whether the law of
Illinois or Minnesota applies or whether the law of either state
would permit a settlor, through a spendthrift clause, to nullify
a part of the beneficiary’s divorce settlement in a case such as
this. We conclude that the terms of the trust itself compel af-
firmance of the trial court’s order. The relevant portions of the
trust provide:

“All withdrawals shall be made by written instrument de-
livered to the Trustee during the lifetime of [the beneficiary]
and after the right to make the withdrawal requested has ac-
erued.

ee OR KOK

“The income payments provided for hereunder shall only be
made when and as such income, after it shall have accrued, ‘shall
be in the possession of the Trustee for payment and no disposi-
tion, charge or encumbrance of such income or of the principal
of the Trust Fund, or of any part thereof, by any beneficiary
hereunder by way of anticipation shall be of any validity or legal
effect or be in any wise regarded by the Trustee and no such in-
come or principal, or any part thereof, shall in any wise be liable
to any claim (whether legal or equitable) of any creditor of any
such beneficiary.”

Plaintiff has attempted to characterize the issue in this case
as whether a spouse’s claim for alimony and child support and,
as in this matter, a property division can reach the assets in a
spendthrift trust. Although prior decisions of this court have
established that a spendthrift trust is immune from such claims,
Erickson v. Erickson, 197 Minn. 71, 266 N. W. 161 (1936); In
re Trust Created by Moulton, 288 Minn. 286, 46 N. W. 2d 667
(1951), the law of Illinois is unclear, cf. Dinwiddie v. Baum-

EC 545

berger, 18 Ill. App. 3d 938, 310 N. E. 2d 841 (1974); Keller v.
Keller, 284 Ill. App. 198, 1 N. E. 2d 778 (1986). Plaintiff fails
to grasp the distinction between the two types of protection af-
forded by the spendthrift provision. On the one hand, it exempts
assets in the hands of the trustee from attachment, garnishment,
or execution to pay the debts of the beneficiary. Such protection
may be effective even though the beneficiary has the unqualified
right to withdraw the assets. Erickson v. Erickson, supra. This
case concerns the second aspect of the spendthrift clause, which
declares assignments of trust assets “by way of anticipation”
null and void. Black, Law Dictionary (Rev. 4 ed.) p. 119, defines
“anticipation” in part as: .

“Act of doing or taking a thing before its proper time * * *.

“In conveyancing, the act of assigning, charging, or otherwise
dealing with income before it becomes due.”

Webster’s Third New International Dictionary (1961) p. 94, de-
fines “anticipation” in part as:

«* * * J: the use or spending of money before it is due or
available: as a: the taking or alienation (as by assignment) of
the income of a trust estate before it is due.”

We believe the effect of this trust provision is to nullify, so far
as can be legally done, any assignment of income or principal
before the same is subject to withdrawal by the beneficiary. The
justification for such a provision is obvious. If a beneficiary of
a spendthrift trust can assign part of the trust before it becomes
due, he essentially has present control over the assets and the
spendthrift clause is defeated. This rationale does not apply once
the assets are subject to withdrawal. The settlor intended that
the beneficiary at that point would have the ability to dispose
of the assets by his voluntary act. We therefore hold that this
trust does not declare null and void a voluntary assignment of
trust assets once the unqualified right to withdraw the assets
has accrued. Such assignment does not violate the intent: of the
settlor. Since plaintiff does not otherwise contest the validity

546 a

of the divorce settlement, it is a valid and enforceable agree-
ment.

it may well be that the trial court would have lacked au-
thority to order plaintiff to withdraw any assets from this trust
if plaintiff had not agreed to do so by the stipulation. By agree-
ment, the parties to a divorce can impose obligations beyond the
authority of the divorce court. LaBelle v. LaBelle, 302 Minn. 98,
2238 N. W. 2d 400 (1974). This obligation became a part of the
divorce decree and may therefore be enforced through contempt
proceedings. Minn. St. 518.24. The judgment appealed from is
therefore affirmed.

Affirmed.

STATE v. CECILE OUSLEY.
254 N. W. 24 73.

April 15, 1977—No. 46415.

P|

C. Paul Jones, State Public Defender, for appellant.

Warren Spannaus, Attorney General, Gary W. Flakne, County
Attorney, Vernon E. Bergstrom, Chief, Appellate Division,
David W. Larson and Phebe S. Haugen, Assistant County At-
torneys, and Lee Barry, Law Clerk, for respondent.

Per CURIAM, :

This is a child abuse case. Defendant, who is the mother of the
child in question, was found guilty by a district court jury of a
charge of aggravated assault, Minn. St. 609.225, subd. 2, a charge
arising out of a severe beating which she and a man living with
her administered to the child.1 A charge for second-degree man-
slaughter, Minn. St. 609.205, arising out of the bathtub drowning
death of the child about a week after the beating, was dismissed
upon motion of the state when defendant was sentenced for the
assault conviction. Issues raised by defendant on this appeal
from judgment of conviction are (1) whether the Rasmussen
court erred in refusing to suppress statements defendant made
to police on two occasions, (2) whether the trial court erred in
admitting photographs of the dead child showing his injuries,
and (3) whether there was as a matter of law insufficient evi-
dence to support the conviction. We affirm.

Defendant’s first contention is based on the fact that the in-
vestigating officer did not give her a Miranda warning when he
questioned her at home on the day of the drowning. She contends
that as a result, of this her first statement was inadmissible and
that her second statement, made at the police station several days
later, was the fruit of the earlier illegal interrogation. If there
were any doubts about the correctness of the Rasmussen court’s
ruling, and we do not believe there were, those doubts were
erased by the United States Supreme .Court’s recent decision,
in Oregon v. Mathiason, 429 U. S. 492, 97 S. Ct. 711, 50 L. ed. 2d
714 (1977). There the court emphasized that the test’ in deter-
mining the need for a Miranda warning is not whether the inter-
rogation has coercive aspects to it or whether the person being
interrogated is a suspect, but whether the person is in custody
or otherwise deprived of his freedom of action in any significant
way. Here, defendant was not in custody nor was her freedom

1 Defendant was sentenced to a maximum 5-year term in prison with
execution stayed and defendant placed on 5 years of probation, the first
year to be spent in the workhouse. While in the workhouse. defendant
was furloughed to a community-based corrections program.

548

of action restricted in any significant way when the investigat-
ing officer questioned her at home.

Defendant’s second contention is that the trial court erred in
admitting photographs showing the dead child’s injuries because
of an agreement between the prosecutor and the defense counsel
that the jury in the aggravated assault trial would not be told
of the child’s death. After examining the pictures, we reject this
contention. Not only were the pictures highly relevant? but we
believe it unlikely that the jury would have concluded from view-
ing the pictures that the child was dead.

The only other issue is whether there was as a matter of law
insufficient evidence that defendant intended to hurt the child
when she beat him. There is absolutely no merit to this conten-
tion.

Affirmed.

GEORGE SKALICKY v. 0. R.
ANDERBERG AND ANOTHER.
STATE TREASURER, CUSTODIAN OF
SPECIAL COMPENSATION FUND, RELATOR.

253 N. W. 20.155.

April 15, 1977—No. 47047.

2 The pictures depict, as no testimony could, the severity of the beat-
ing defendant and her companion administered to the child, and they
reveal the nature of other bruises and scratches on the child’s body and
thereby aided the jury in assessing defendant’s claim that she had
never beaten the child severely before and had not intended to this
time.

|

Warren Spannaus, Attorney General, Richard B. Allyn, Solici-

tor General, and Winston Ehlmamn, Assistant Attorney General,
for relator.

ee

PER CURIAM,

Relator, State Treasurer, custodian of the Special Compensa-
tion Fund seeks review of a decision of the Worker’s Compensa-
tion Court of Appeals directing that it administer the supplemen-
tary benefit payments to the employee from and after August
31, 1972. Minn. St. 176.132, subd. 3. We affirm.

Minn. St. 176.132, subd. 3, provides as follows in directing the
payment of supplementary benefits:

“The payment of supplementary benefits shall be the responsi-
bility of the employer or insurer currently paying total disability
benefits, or any other payer of such benefits. When the eligible
individual is not currently receiving benefits because the total
paid has reached the maximum prescribed by law prior to March
1, 1974, then supplementary benefits will be paid directly to the
individual by the administrators of the special compensation
fund. The employer or insurer paying the supplementary benefit
shall have the right of full reimbursement from the special com-
pensation fund for the amount of such benefits paid.”

The record indicates that employer’s insurer, Reliance In-
surance Company, made weekly permanent total disability
compensation payments of $45 to the employee for the period
from March 4, 1964, to October 2, 1971. The aggregate amount
of these payments was $18,000, the maximum provided in Minn.
St. 1964, § 176.101, subd. 4.

Supplementary benefits were then paid by the insurer for the

550

period from January 1, 1972, to August 31, 1972, totaling $1,-
782.80, for which reimbursement was sought from the Special
Compensation Fund. Minn. St. 176.182, subd. 3. Commencing
on August 31, 1972, the employee received weekly social security
benefits in the amount of $45.28. The parties are in agreement
that this latter payment exceeds the weekly permanent total dis-
ability compensation payment of $45 and thus terminates the
obligation of the insurer to continue the disability compensation
payments to the employee.

Minn. St. 176.132, subd. 3, requires an employer or insurer cur-
rently paying total disability benefits to make payment of sup-
plementary benefits and seek reimbursement from the Special
Compensation Fund. As the insurer’s obligation to continue dis-
ability payments was terminated upon the payment of social
security benefits in an amount greater than disability payments,
there is no current obligation on the part of the insurer. Rather,
that portion of § 176.182, subd. 3, requiring direct payment from
the Special Compensation Fund is applicable where, as here, the
total paid has reached the maximum of $18,000 as prescribed by
Minn. St. 1964, § 176.101, subd. 4.

The interpretation employed by the Court of Appeals in requir-
ing direct.payment of supplementary benefits from the Special
Compensation Fund is consistent with the legislative intent to
prevent duplicative and cumbersome payment procedures in spe-
cified instances.and is therefore affirmed.
- Affirmed.

es 551

JAMES GOODMAN v. MINNESOTA
DEPARTMENT OF EMPLOYMENT SERVICES.

255 N. W. 2d 222.

April 15, 1977—No. 47116.

Michael Fargione, Legal Aid Society of Minneapolis, Inc., for
relator.

Warren Spannaus, Attorney General, Richard B. Allyn, Solici-
tor General, Peter C. Andrews, Assistant Attorney General,
William G. Brown, Special Assistant Attorney General, for
respondent.

d
|

Writ of certiorari to review a decision of the commissioner
of employment services holding claimant ineligible for unemploy-
ment compensation because he was “unavailable for work” with-
in the meaning of Minn. St. 1974, § 268.08, subd. 1(3). We re-
verse and remand on the ground that the commissioner applied
an erroneous theory of law in concluding that claimant was un-
available for work.

In Hansen v. Continental Can Co. 301 Minn. 185, 221 N. W.
2d 670 (1974), we reversed a decision of the commissioner which
denied compensation solely on the ground that the claimant was
attending college on a full-time basis. In doing so, we stated as
follows:

552

“Minn. St. 1971, § 268.08, subd. 1(8), does not require a
claimant to remain idle. Attending college does not by definition
make a claimant unavailable for work. A claimant must be ‘ac-
cessible or attainable for work when suitable work is offered
at such hours as are customary in the type of employment to
which he is suited.’ He must be ‘genuinely attached to the labor
market.’ Olson v. Starkey, 259 Minn. 364, 371, 107 N. W. 2d 386,
891 (1961). A claimant ‘may not limit [his] availability because
of personal or domestic reasons unrelated to [his] employment.’
Thompson v. Schraiber, 253 Minn. 46, 48, 90 N. W. 2d 915, 916
(1958). The claimant should be interested, willing, and ready
to accept available employment. Olson v. Starkey, supra. But
the statute does not restrict the claimant from pursuing his inter-
ests while unemployed. A claimant may further his education
while unemployed and still receive benefits so long as he meets
the statutory requirements for eligibility and the tests for avail-
ability. - .

“Relator in the instant case meets all these tests of availability.
He placed no conditions or restraints on his availability. He of-
fered to quit school or switch shifts in order to secure employ-
ment. At no time did he limit his accessibility or reject employ-
ment. No evidence was presented to show a lack of interest in
work or an unwillingness to work. All the evidence demonstrated
his availability for work.

“We limit this holding to the facts of the instant case, where
the relator expressed his willingness to accept employment at
any time and even to quit school to do so. Those involuntary un-
employed still must actively seek employment, not place condi-
tions or restrictions on their availability, and be a genuine part
of the labor force. We do not hold in any way that a student may
refuse daytime employment and collect benefits merely because
he customarily worked the night shift. Even if the student meets
the initial statutory tests for eligibility, he still must remain
eligible. The statute does not contemplate enforced idleness, only

— 553

availability. We therefore reverse.” 301 Minn. 187, 221 N. W.
2d 672.

In response to our decision in-the Hansen case, the commis-
sioner issued a memorandum to claims deputies directing them
to deny compensation to involuntarily unemployed workers at-
tending college unless they had been students before they lost
their jobs, even though they were actively seeking work, were
available to work, and were willing to quit college if they ob-
tained suitable employment that conflicted with their college
hours. Such a directive is contrary to the clear holding of this
court in the Hansen case.

While in this case the decision of the appeal tribunal (which
the commissioner adopted) did not cite this directive, it did state
that “A full-time student such as the claimant is not considered
available for work because of the limitations necessarily imposed
by his school commitments.” This kind of blanket rule denying
compensation to involuntarily unemployed workers who attend
college is also clearly contrary to our decision in the Hansen case.

The determination which the commissioner must make in such
cases is a factual one: Is the claimant in fact actively seeking
work and is he in fact willing to quit college if offered suitable
employment that would conflict with his college schedule? Stated
differently, the factual determination which the commissioner
must make is whether the claimant’s attachment to the work

force is genuine. Semanko v. Department of Employment Serv-
ices, 809 Minn. 425, 244 N. W. 2d 663 (1976).
Reversed and remanded.

. IN RE ARBITRATION OF DOLLAR SHELTER, INC. ,
v. IRVIN ANDERSON.

250 N. W. 20589,

February 4, 1977—No. 45851.

nn rrereeeerecen!

Grathwol, Ploetz, Oberhauser & Nodland and Gary A. Thompson, for
appellant.

Hvass, Weisman & King, Gary C. Hoffman, and Russell F. Pannier,
for respondent.

Heard before Sheran, C. J., and Rogosheske, Peterson, Todd, and
Yetka, JJ., and reheard and reconsidered by the court en banc.

Par Curram,

This is an appeal by Irvin Anderson from an order of the district
court denying his motion to vacate or modify an arbitration award in
favor of respondent, Dollar Shelter, Inc. Reversed and remanded with
instructions.

In our recent decision of State v. Coin Wholesalers, Inc. 311 Minn.
346, 250 N. W. 2d 583 (1976), we held that there was a violation of the
Minnesota securities laws, Minn. St. 1974, c. 80A, in the sale of silver
coins on margin by respondent. The practical effect of that decision is
to allow appellant, a party to the class action, to recover from respond-
ent, for although the instant case is before us in a different posture, the
judgment at bar was not entered pursuant to any finding by the arbitra-
tor on the question of alleged security law violations.

As this issue has now been fully determined, we conclude that the
instant matter must be remanded to the trial court with instructions
that it vacate the judgment entered herein in accordance with the
principles set forth in the Coin Wholesalers case.

Reversed and remanded with instructions.

The petition for rehearing is denied. The original opinion filed in this
case on December 30, 1976, is withdrawn and this opinion is substituted
therefor.

as ‘BBS
JOHN W. MURPHY v. CITY OF ROCHESTER. °--

250 N. W. 20.845.

February 4, 1977—No. 46457.

Gerald H. Swanson, City Attorney, for relator.

ee

Perr Curiam.

The employer seeks review of a decision of the Workers’ Compensa-
tion Board awarding the employee benefits for permanent and total dis-
ability. The salient issue on appeal is whether there is substantial evi-
dence in the record as a whole to support the board’s findings. We af-
firm.

The employee began working for the city of Rochester in 1960 in the
sanitation department. After sustaining an injury to his right shoulder
in 1967, he was assigned to the parking meter department, then a sub-
division of the police department. During this succeeding period he also
worked weekend relief at the city scales. While on the job at this loca-
tion, he again injured his right shoulder on May 15, 1970. After re-
cuperating from the second injury, he returned to the meter depart-
ment where he worked until taking a medical leave of absence in
December 1972. He did not return to work after the termination of this
leave of absence in June 1973. He retired on July 7, 1973.

The relevant question is what caused the employee to retire rather
than return to work in July 1973. The employee testified that his
shoulder was worse and he knew that he could not perform his former
duties. Dr. Linscheid’s examination and report of January 24, 1974, and
depositional testimony lent expert medical evidence to his allegation.
The employer offered no contrary medical testimony. Its only effort
to show that the employee was not totally disabled was to show that
parking meters could be emptied with one hand. The demonstrator indi-
cated that this could be done with some difficulty.’ of

After a careful review of the record and the transcript, this court de-

556 ee

termines that the decision of the Workers’. Compensation Board is
based on findings of fact which are supported by substantial evidence.
Affirmed.

On1s, Justice (dissenting).

The relator, the city of Rochester, seeks review of a decision of the
Workers’ Compensation Board affirming a decision of Compensation
Judge John H. Combs and awarding the city’s former employee, John
W. Murphy, benefits for permanent and total disability.

On August 11, 1967, while working for Rocliester and in the course
of his employment, Murphy injured his right shoulder and arm. That
injury resulted in a nine-week total disability. After the injury, Murphy
was assigned to the city’s parking meter department. While assigned
to the parking meter department, Murphy occasionally worked at the
city scales, While working at the city scales on May 15, 1970,-and in the
course of his employment, Murphy again injured his right shoulder and
arm. The reinjury in 1970 resulted in a four-day total disability. The
two injuries resulted in a 45-percent permanent partial disability to the
right arm.

After recuperating from the second injury, Murphy returned to the
meter department where he worked until November 14, 1972, which
was his last day of work, before he retired on July 7, 1973, at about 64
years of age. He took a medical leave of absence in December 1972 and
did not return to work after its termination in June 1973. Murphy re-
tired; according to his own testimony, because he “figured [he] had to”
since, even though he never asked anyone, he did not think the city of
Rochester had any work he could do.

He testified at the hearing that he was unable to work in November
1972 solely because of the pain in his shoulder. Yet his statements to
his employer by phone and by letter, and the statements by his doc-
tors attributed his absences, and the need for a leave of absence, to
respiratory and stomach problems completely unrelated to his employ-
ment.

He admitted that he didn’t bother to ask the city of Rochester, let
alone any other potential employer, if they had work for him. Murphy’s
own medical witness, Dr. Linscheid, stopped short of offering an opin-
ion that Murphy was totally disabled. He simply said that he did not
think Murphy capable of “significant” use of the shoulder in a manual
occupation. At most, Dr. Linscheid felt that the injury was a 45% dis-
ability of one shoulder and stated that Murphy could probably do some
type of manual work, perhaps even his job as meter man, although that
particular work might tire him quickly. In my opinion such testimony

a 557

does not support a finding of total and permanent disability and I
would reverse.

FRANKLIN P. LEHN v. EBINARD RONALD KLADT.
STATE TREASURER, CUSTODIAN OF
SPECIAL COMPENSATION FUND, RELATOR.

250 N. W. 2d 846.

February 4, 1977—No. 46822.

Warren Spannaus, Attorney General, and Thomas G. Lockhart, Spe-
cial Assistant Attorney General, for relator.
Nicklaus & Leatham and Robert A. Nicklaus, for respondent.

|

Per Curiam.

The state treasurer seeks review of an order of the Workers’ Com-
pensation Board awarding the employee, Franklin Lehn, benefits for
temporary total and permanent partial disability.1 The sole issue raised
on appeal is whether the automobile accident which resulted in the em-
ployee’s disability arose out of and in the course of employment. We
affirm.

On February 21, 1974, the employee was injured en route to his home
after a day’s work when the automobile in which he was riding and
operated by the employer was involved in a collision. The record indi-
cates that for the period from January 5, 1974, until February 21, 1974,

1 The special compensation fund is a party to this action as the em-
ployer was uninsured at the time of the injury. The fund is entitled to
seek reimbursement from the employer pursuant to Minn. St. 176.185.

558 Po

‘the date’ of, the accident, ‘the employer had regularly driven the em-
ployee to and from work and that this was the employee's  gole mode
of transportation to and from work during this period.

The board reviewed the conflicting testimony of the parties; the em-
ployee stated affirmatively that he considered the transportation so
provided to be a part of his job, while the employer classified it merely
as a gratuity. It concluded that the transportation was regularly
furnished to insure that the employee was at’ work and that the injury
was within the scope of employment.

‘We have repeatedly cited the general rule that an injury to an em-
ployee in going to or returning from the employer’s premises where
his employment duties are performed does not arise out of and in the
course of his employment so as to be compensable under the act. Young-
berg v. The Donlin Co, 264 Minn. 421, 119 N. W. 2d 746 (1963); Cavilla
v. Northern States Power Co. 213 Minn. 381, 6 N. W. 2d 812 (1942). A stat-
utory exception is found in Minn. St. 176.011, subd. 16, which in de-
fining “personal injury” provides as follows: ~ .

“Where the employer regularly furnished transportation to his em-
ployees to and from the place of employment such employees are sub-
ject to this chapter while being so transported * * *,”2

The credited testimony in this case sustains the finding that the fur-
nishing of transportation to the employee was for the convenience and
economic benefit of the employer. It had been the practice of the em-
ployer, at least for the period between January 5 and February 21, 1974;
and on the day that the accident occurred, the employer had driven the
employee to work at between 5:30 and 6 a. m. in the morning, working
straight through the day until approximately 11 or 11:30 p. m., stopping
for supper en route back to the employee’s residence. The employee
testified in part: .

2 This court has construed this provision as authorizing compensation
where the employer furnishes transportation as an express or implied
term of the employment contract. Radermacher v. St. Paul City Ry. Co.
214 Minn. 427, 8 N. W. 2d 466 (1943); Wiest v. Bolduc, 178 Minn. 310, 227
N. W. 48 (1929). However, coverage has been denied upon a finding that
the employee was transported merely for his own convenience, as a
permissive use and not as a matter of right under the employment con-
tract. Bonfig v. Megarry Bros.,-Inc. 294 Minn. 180, 199 N. W. 2d 796

(1972); Cavilla v. Northern States Power:Co. 213 Minn. 331, 6 N. .W. 2a
812 (1942). :

S| 559

“Q. Okay. Now, prior to the accident, and on the day.of the accident,
how did you get to work?

“A. Well, sit weeks prior to the accident Doc had made the comment
that if he didn’t get me out of bed by at least 5:30, and down to work
at 6:00, I’d never get out of the yard early enough to get the additional
tonnage hauled that he thought should be hauled.

“Q. So what arrangements did you make then as far as—

“A. Imade no arrangements. Doc, he told me he was coming to pick
me up in the morning and he’d bring me back home at night.

“Q. And did he, in fact, then come to pick you up in the morning?

“A. Yes, sir, he did. |

“Q. Each and every morning?

“A, Every morning he was usually there by 5:30.

“Q, And then you'd jump in his car and he’d take you to work?

“A. Right. :

“Q. And how did this work from a practical or mechanical stand-
point of getting a jump on the loads?

“A. He got an economic boost financially.”

(Italics supplied.)

A fellow employee at the salvage yard, Ray Booth, testified in this
rather graphic language when asked if the employer had ever men-
tioned the transportation arrangement to him:

“And Frank was with him, and Doe says, yeah, he says—well, he says
—at least he said, if I bring the son of a bitch to work I'll know he’s
here every day. It’s just in them words.”

‘There was no other testimony on this issue except that of the employer,
which the commission was not bound to credit. Thus, the employee has
sustained his burden of proof and the decision of the board must be
affirmed.

Respondent is allowed $350 attorneys fees.

Affirmed.

* The burden of establishing that transportation was regularly fur-
nished as a condition of employment is upon the employee. Hardware
Mutual Cas. Co. y. Ozmun, 217 Minn. 280, 14 N..-W. 2d 351 (1944).

560 Le
DARWIN HARTKE v. PIONEER ENGINEERING.
251 N, W.2d.113.

February 10, 1977—No. 46529.

Van Eps, Gilmore & Chantry and George R. Benton, for relator.
Abrams & Spector and Richard B. Abrams, for respondent.

Per CuriaM.

Employer seeks review of a unanimous decision of the Workers’
Compensation Board awarding the claimant employee compensation
benefits. The issues on appeal are whether there is substantial evidence
in the record as a whole to support the board’s findings that the em-
ployee is temporarily and totally disabled and that his employment was
a substantial cause of his disability. We affirm.

There was a conflict in the testimony on both the issue of the em-
ployee’s disability and the issue of the cause of it. Expert witnesses
called by the employee testified that he was totally disabled by ad-
vanced pulmonary emphysema and that his continuous on-the-job ex-
posure to a chemical coolant and clouds of iron dust substantially ag-
gravated his preexisting lung condition to cause the disability. Em-
ployer’s experts testified that employee was not totally disabled and
that his chain smoking, rather than his exposure to these materials,
caused the deterioration of his condition,

Following the rule that it is the board’s function to resolve conflicts
in the evidence, we affirm.

Respondent is allowed $350 attorneys fees.

Affirmed.

Ons, Justice (dissenting).

This employee went on strike on April’ 14, 1973. He thereafter went
on vacation, fractured a rib, and subsequently suffered a collapsed lung
which required surgery. He has never attempted to return to work,

as 561

The employee testified he began smoking cigarettes at the age of 15
and continued to smoke an average of three-fourths of a pack a day for
40 years.

At the time he quit work, he was suffering from pulmonary emphyse-
ma. There is no claim the disease was work related. The employée com-
plained that he had been exposed to a commercial coolant called Cim-
Cool. However, an expert witness for the employer testified that it con-
sisted only of borax and soap and that it was nontoxic, The employee’s
doctor testified that the employee’s condition had been aggravated by
iron dust as well as by the coolant, although he didn’t know the com-
ponent parts of the coolant. The employee further testified that smoke
from the torch burners, iron dust, and haze from the welders ag-
gravated his condition. The employee’s doctor, however, also acknowl-
edged that there was no way of knowing whether or not, without such
irritants, the employee would have progressed to the same level of dis-
ability.

An occupational health engineer examined the plant and testified it
‘was well ventilated and that any irritants in the air were within oc-
cupationally safe limits. In this state of the record, it seems clear to me
there was no substantial evidence from which the Workers’ Compensa-
tion Board could attribute the employee’s total disability to anything
more than his nonwork-related, progressive, degenerative pulmonary
emphysema which was caused or aggravated by excessive smoking over
a span of some 40 years.

PHYLLIS J. STARR v. EDWARD P. STARR.

251 N. W. 2d 341.

February 18, 1977—No. 46502.

562 Ee

Thomson, Wylde & Nordby and Fred A. Reiter, for appellant.
Schway & Gotlieb and Eugene J. Schway, for respondent.

Per Curiam,

The parties to this action were divorced by judgment and decree on
August 13, 1973, in accordance with the terms of a stipulation between
the parties. The stipulation and decree granted custody of the parties’
seven minor children to plaintiff and provided that defendant pay child
support in the amount of $100 per month per child. In addition, the
stipulation and judgment and decree provided as follows:

“That as additional support for the minor children, Defendant shall
pay to Plaintiff 25% of the increase in the net taxable income of De-
fendant up to $10,000.00 of additional net taxable income and shall pay
10% of the net taxable income of the next $20,000.00 of increased taxable
income, which sum shall be paid to Plaintiff within 30 days after the
date required for filing a tax return for Defendant commencing with
the tax return due the year 1974. In connection therewith Defendant
shall furnish to Plaintiff a copy of his partnership tax return and his
personal income tax return for the preceding year. This procedure shall
be followed each and every year so long as he shall be required to pay
support or alimony. At this time Defendant has a net taxable income
of $14,000.00 per year and any inereases shall be considered from that
point.” (Italics supplied.)

The instant appeal arises from plaintiff's motion to find defendant
in contempt of court for the violation of this and other provisions of
the judgment and decree. Upon a hearing in the Ramsey County
Family Court, the referee considered arguments upon the precise mean-
ing of the term “net taxable income” within the context of the judg-
ment and decree.

The referee concluded from the surrounding circumstances, the nego-
tiations preceding the stipulation, and practical considerations that “net.
taxable income” as used in the decree was to be construed as adjusted
gross income. As such, defendant’s 1973 income tax return reflected an
increase of $9,186, of which 25 percent or $2,296.50 was awarded to plain-
tiff as additional child support. The referee’s findings, order, and memo-
randum were confirmed by the district court over the objections of
defendant.

‘The sole issue presented is whether the district court erred in con-
struing the term “net taxable income” to mean adjusted gross. income.

The general rule for the construction of contracts, which the parties

De 563

agree governs the interpretation of the: stipulation, is that where the
language employed by the parties is plain and unambiguous there is no
room for construction.1 North Star Center, Inc. v. Sibley Bowl, Inc. 295
Minn. 424, 205 N. W. 2d 331 (1973). Defendant argues that the phrase
“net taxable income” as contained in the stipulation and decree is gov-
erned by this rule. However, technical trade terms will not be given
their technical meaning if it is clear from the surrounding circum-
stances, the negotiations leading to the contract, or the practical con-
struction intended by the parties that they contemplated a different
meaning of the terms. Sell v. Lenz, 149 Minn. 200, 183 N. W. 185 (1921).

While “net taxable income” is not ambiguous in its normal trade
usage, it is ambiguous in the context of the parties’ stipulation. The
stipulation provision at issue, entered June 21, 1973, as set forth, con-
tains a statement that defendant’s net taxable income was $14,000 per
year. The record indicates that defendant’s 1972 Federal tax return,
filed subsequent to the agreement to the terms of the stipulation, ex-
hibits adjusted gross income of $11,541 and a taxable income of minus
$379. Therefore, if, as plaintiff contends, the 1972 earnings were the
basis of defendant’s estimated net taxable income, the adjusted gross
income figure most closely approximates that estimate. .

Defendant contends that the estimate was based rather upon his 1973
projected earnings. In support thereof he offered evidence that his 1973
adjusted gross income was $23,186 and his taxable earnings were
$11,260. He therefore concludes that for 1973, his taxable income more
nearly approximated his “net taxable income” as contained in the stipu-
lation,

Although the findings of the referee, as confirmed by the district
court, do not specifically conclude that the estimate was based upon de-
fendant’s 1972 earnings, that conclusion is implicit. The district court
found that equating defendant’s adjusted gross income with “net tax-
able income” as contained in the stipulation was reasonable, for as ex-
emplified in defendant’s 1972 return, the use of exemptions and deduc-
tions could substantially reduce the net taxable income figure and
therefore defeat the obvious intention of the parties that additional sup-
port be provided upon an increase in defendant’s disposable income.

As the findings of the district court have a reasonable basis and are
not clearly erroneous, they are affirmed in all respects,

Plaintiff is allowed $350 attorneys fees.

Affirmed.

1 Whether we are limited to the rules applicable to the construction
of contracts is neither presented nor decided. ~

564 Le

JOHN: A. BUTLER v. BLONIGEN CONSTRUCTION,
INC., AND OTHERS.

. 252.N. W. 2d 246,

February 18, 1977—No. 46792.

a
Yngve & Reiersgord and Thomas E. Reiersgord, for relators.
Cousineau, McGuire, Shaughnessy & Anderson and John W. Romine,

for respondents Hagen and its insurer.
Richard C. Smith and Larry Meuwissen, for respondent employee.

Per CurraM.

Relators, Blonigen Construction, Inc., and Verdi B. Blonigen, seek
review of a decision of the Workers’ Compensation Board determining
that John A. Butler was their employee at the time of a work-related
accident and awarding Butler, a carpenter, compensation against them
and Hagen Builders Co. Inc.? Relators challenge the board’s findings
that Butler was an employee and that both of them were his employers.
We affirm.

Butler, a journeyman carpenter, had worked since 1960 as a general
contractor, a carpentry subcontractor, or an employee. He was laid off

1 Now the Workers’ Compensation Court of Appeals, L. 1976, c. 134,
§ 78.

2 Because relators did not carry compensation insurance, liability was
imposed on Hagen as general contractor pursuant to Minn. St. 176.215,
subd, 1, and Hagen was granted subrogation against relators pursuant
to § 176.215, subds. 2 and 3.

Es 565

in June 1973. Verdi Blonigen, also a carpenter, was a general contractor
and the sole owner and stockholder of Blonigen Construction, Inc. Hr
did business under his own name, as Blonigen Construction, and as
Blonigen Construction, Inc. Shortly after being laid off, Butler and
John Lundin, who is also a carpenter, went to work for Blonigen. On
the first of Blonigen’s jobs, a house in Plymouth, Butler worked as a
subcontractor. On the next, an addition to a home in Glen Lake, Butler
claims he worked as an employee for $10 an hour, while Blonigen
claims Butler was again a subcontractor. Work on the Glen Lake
project was interrupted by a strike, and Butler was paid for his-work
at the hourly rate.

While Butler was working on the Glen Lake job, Hagen contracted
to construct ’a house in Minnetonka and wished to subcontract the car-
pentry. James Gilbertson, one of Hagen’s owners, contacted Blonigen.
He could not handle the job himself but talked with Butler about it,
who was interested but thought Hagen’s price of $3,100 was low. Gil-
bertson refused to increase it, and Blonigen, without consulting Butler,
executed a contract with Hagen. Butler and Blonigen agree that their
initial understanding was that Butler and Lundin would do the work
and upon completion of the job, receive the entire $3,100. Butler and
Lundin insist that this understanding was not a contract but prelimi-
nary only and called for a written contract. Butler said he asked Bloni-
gen two or three times to draw up the contract, but Blonigen did not
do so. Blonigen did not reveal to Hagen that Butler and Lundin were
to do the work.

Butler worked on the Minnetonka job several days before he was
seriously injured in a fall on August 6, 1973. Hagen had already paid
Blonigen the full contract price, and he attempted unsuccessfully to
finish the job. He eventually paid Lundin and Butler for their work at
a rate of $10 an hour, using a personal check and money orders pur-
chased by Blonigen Construction, Inc.

Our review of the evidence satisfies us that the findings challenged
by relators—that Butler was an employee and that he was the employee
both of Blonigen Construction, Inc., and Verdi Blonigen—are supported
by substantial evidence in view of the entire record as submitted and
accordingly must be affirmed. Hammes v. Suk, 291 Minn. 233, 190 N. W.
2d 478 (1971); Minn. St. 15.0425.

Although relators claim that Blonigen acted only as an agent for
Butler, the evidence did not require the board to accept this contention
or to find that Butler was an independent contractor. In finding that
Butler was, instead, an employee, the board applied the well-established

566 |

criteria repeated in Lundy v. City of Worthington, 303 Minn. ns 38). 40, 226,
N. W. 2d 295, 296 (1975):

: “& * (1) The right to control the means and. manner of perform.
ance; (2) thé mode ‘of payment; (3) the furnishing of material or
todls} (4): the control of the premises where the work is done; and (5)
the right of the employer to discharge. In determining whether the
status is one of employee or independent contractor, the most impor-
tant factor considered in light of the nature of the work involved is the
right of the’ ‘employer to control the means and manner of perform-
ance.”

The most important of these tests is whether Blonigen had the right
to control the means and manner of performance. Hammes v. Suk, 291
Minn. 233, 235, 190 N. W. 2d 478, 480 (1971). While the evidence is incon-
clusive with respect to some of the other tests, the record supports the
board’s conclusion that Blonigen retained control over Butler’s work.

“The record also discloses adequate evidentiary support for the
board’s finding that both Blonigen Construction, Inc., and Blonigen
individually were Butler’s employers since the documents placed in evi-
dence by relators themselves reveal that Blonigen customarily carried
on. his business, including his relationships with Butler, both in an indi-
vidual capacity and through the corporation.

_ Respondent is allowed $350 attorneys fees.
‘Affirmed. * °

_ WARNER K. BUSCH v. CITY OF DULUTH AND ANOTHER.
251 N. W. 2d 629.

February 25, 1977—No, 46195.

+ Fitch. & Johnson and Raymond W. Fitch, for relators. .
, Alfred J. Weinberg, for respondent, -

Per CuriaM, . .

The employer and insurer seek review of a decision of the Workers’
Compensation Board awarding the employee benefits for continuing
temporary total disability. On appeal relators concede the issue of
causation between the employee’s arteriosclerotic heart disease and his
employment as a fireman, but challenge the evidentiary support for the
board’s finding of temporary total disability.

In June 1972 the employee experienced a momentary tightness in his
chest which he ignored. In September 1972 he experienced a longer’ epi-
sode after which he made an appointment with Dr. Goldish. Dr.
Goldish, an internist and cardiologist, examined the employee during
a 3-day hospitalization. The employee’s symptoms and test results indi-
cated angina pectoris. Dr. Goldish diagnosed his condition as inferior
wall myocardial ischemia. He described the process as not a rapidly ac-
celerating one with no evidence of impending heart attack. His recom-
mendations and treatment were as follows:

“T advised certain precautions regarding activity such as gradually
doing some progressive strolling outdoors, to rest briefly after meals,
to start working October 2nd, if all felt well, to maintain a low choles-
terol diet and to take headache medications when tension headaches
would occur, to take gelusil for prevention of ulcer and to use nitrogly-
cerine for any recurrent chest pain, to take nitrate peritrate, S. A.

“T elected to avoid using anticoagulant drugs because of the possible
danger of bleeding, which could occur on such drugs, incident to his oc-
cupation or history of peptic ulcer.”

His recommendation that the employee return to work was based on
his misconception that the job of fire captain was largely administra-
tive or supervisory. With a realization of the job responsibilities} of a
fire captain, he stated that this occupation was contraindicated.

The employee returned to work for one 24-hour shift and was then
relieved of his duties as not physically fit. He has not worked or looked
anywhere for work since that date.

‘The employee was 51 years old at the time of the compensation hear:

1 A fire captain works 24-hours shifts. He has some administrative re-
‘sponsibilities such as conducting drills and maintaining paperwork. He
must ascertain the location of a fire and get the proper equipment to
the scene. He must appraise the severity of the fire, go into the building
if lives are at stake, take the line into the building, and fight the’ fire
until relieved. :

568 Es

ing. He has the equivalent of a high, school diploma through the service.
Prior to joining the Duluth Fire Department he worked as an oiler for
U.S. Steel, a brakeman for the D. M. & I. Railroad and as a ‘structural
iron worker for various contractors. He was also employed by Little
Theatre Groups as technical director for 8 years ending in 1972. He
maintains a home for three of his children. He is divorced. Before leav-
ing the fire department he had someone come in to take care of his chil-
dren and the house when he worked. He is currently drawing $570 per
month from the fireman’s pension fund.

The employee has remained fairly active. He stated that maintaining
the household occupies most of his time, but he reads and spends some
of his leisure time at the Little Theatre playhouse. He walks a couple
of miles without difficulty and bicycles regularly on the doctor’s recom-
mendation. He mows his lawn, removes the snow with a snowblower
and some shoveling. He stated that he understands the disease process
of the heart and that he cannot go as hard as he did in the past.

He states that he has no chest pain at the present time, but that he
is not comfortable. He has prescribed medication, but has not had to
take any. .

Dr. Goldish last examined the employee in August 1974. His findings
at that time reconfirmed his diagnosis of arteriosclerotic heart disease
with angina pectoris. At the compensation hearing he was asked to give
his opinion as to the employee’s work potential. He responded that the
employee was permanently disabled as a fire fighter. He then added
the following:

“Q. What sort of duties could he perform within the limitations of
his heart condition that you can think of now?

“A. I think he could be a truck driver. He could do occupations that
involved sporadic lifting of 50 or 100 pounds from the floor to a table,
but I would advise that he avoid occupations that might involve carry-
ing 50 pounds or 100 pounds up say more than one flight of stairs at a
reasonable pace.

“Q. Would there be any problems doing work which involved mental
processes in a sitting position? I have in mind, like a steno or book-
keeper.

“A. Not except under the most extraordinary conditions and the
answer would be I should expect he could do any sort of work like
that.” .

Dr. Goldish, added that the employee could work at any clerical-retail
occupations or administrative work. He finally concluded with the fol-
lowing general appraisal:

a 569

“A. ‘Yes. He could do all those things with the exception of any job
requiring sudden severe outburst of energy, output or exposure to ex-
treme environmental change or exposure to toxic fumes that might lead
to cardiac difficulty.”

Dr. John Fee was called as an expert by the employer and insurer.
He agreed with the diagnosis of coronary heart disease. He added that
he thought the employee could work in almost any capacity other than
fireman.

The employee stated that he has been willing at all times to work at
something within his physical limits. He was asked the following ques-
tions by the compensation judge:

“Tap Court: Is there any specific reason why you wouldn't look
around for work, if you could?

“Tue Wirness: There probably wouldn’t be, but the reason, of
course, I haven’t is because this is all pending and I have been raising
my family. I haven’t been asked by anyone and when I talked with the
Social Security Officer, he said I would be called upon to enter some
type of school to prepare myself for something and I haven’t heard
from them and I’ve been busy at home.

“Tue Court: Has anybody ever advised you to contact the Rehabili-
tation Division of the State of Minnesota?

“Tur Witness: No. He advised me he was going to contact me.”

On the issue of disability the compensation judge made the following
comments in his memorandum:

“The issue of disability is a problem in this case. No light work has
been offered to the employee by the Fire Department. He is unable to
work as a fireman. However, his physical condition is such that there
are many jobs that he could perform after adequate retraining. The
past two years have been spent primarily in taking care of the house-
hold and as a result the employee has made little attempt to find out-
side work. The only occupational background that might be used by the
employee is one of creating stage settings for the local theatre group.
‘The employee is being referred to retraining and continued on tempo-
rary total disability during that period of time.”

The compensation board’s comments are as follows:

“The medical testimony generally summarized is that the employee
can do sustained light labor but cannot do heavy labor on a sustained
basis. He endeavored to return to work with the fire department, but
he was dropped because of his medical limitation. The City did not fur-
nish him with lighter work. And the employee at the time of the hear-

570 ee

ing did not actively seek further employment. At the hearing neither
side really pursued any establishment of a rate of compensation based
upon a percentage, under either Minn. St. 176.101, Subd. 2 or Subd.
3(46). The Judge awarded continuing temporary total. We concur. The
employee, however, should make active contact with the Division of
Vocational Rehabilitation. And also the desirability of the City of
Duluth furnishing employment to the employee is firmly noted! If, fol-
Jowing the needed efforts of both parties, the employee is merely desir-
ous of drawing his pension and other benefits, and remaining unem-
ployed, application for proper modification can be made to the Com-
pensation Judge.”

‘This appeal appears to be premature. We must therefore remand for
the record to be completed, in light of the compensation board’s instruc-
tion to the employee that he “make active contact with the Division of
Vocational Rehabilitation” for retraining and its suggested “desirability
of the City of Duluth furnishing employment.”

The results of these pursuits must be known before this factual set-
ting can logically lend itself to a meaningful opinion by this court
under the law.

Remanded for proceedings consistent with this opinion.

IDA PATNODE v. LYON’S FOOD
PRODUCTS, INC., AND OTHERS.

251 N. W. 2d 692.

February 25, 1977—Nos. 46846, 46848.

as 571

Chadwich, Johnson & Bridell and John R. Bridell, for’ Telators, em-
ployer and State Automobile Casualty Underwriters. ~

Van Eps & Gilmore and Curtis C. Gilmore, for relators, employer and
Insurance Company of North America.

_DePareq, Anderson, Perl, Hunegs & Rudquist and Ralph E. Koening,
for employee-respondent.

ee

Per CuRIAM.

The chief issues in this case involve the apportionment of liability
between successive insurers for payment of a workers’ compensation
award and the assessment against the insurers of the employee's at-
torneys fees.

In February 1975 Ida Patnode filed a claim petition against, her form-
er employer, Lyon’s Food Products, Inc., and Insurance Company of
North America (I.N.A.), seeking compensation for temporary. total dis-
ability from February 17, 1972. State Automobile Casualty Underwriters
(State Auto), Lyon’s insurer prior to July 1, 1970, was also joined as a
party. The compensation judge and, on appeal, the Workers’ Compensa-
tion Board! determined that while working as a fish packer or cutter
for Lyon’s, employee had sustained compensable injury between 1966
and 1972—aggravation of a preexisting thrombophlebitis in. her right
leg. Liability for the award was apportioned equally between I.N.A. and
State Auto. The board also held that employee’s attorneys fees should
be assessed against the insurers equally pursuant to Minn. St. 176.191
and remanded the matter to the compensation judge to redetermine
their amount. In seeking review, State. Auto contends that employee
did not sustain a compensable injury during the period of its coverage,
that it did not receive notice of injury as required by § 176.121, and that
the apportionment made lacks evidentiary support. Both insurers chal-
lenge the assessment.of attorneys. fees. We affirm.

This court will not disturb findings .of the Workers’ ‘Compensation
Board if they are supported by substantial evidence in view of the en-
tire record. Robertson v. Park Brick Finishers, 300 Minn. 561, 220 N. W.
2d 489 (1974). We are also committed to the principle that conflicts in
medical testimony must be resolved by the trier of fact. Johnson v.
Armour & Co. 297 Minn. 510, 210 N. W. 2d 247 (1973). These rules re-
quire us to uphold the findings that employee sustained a compensable
injury during State Auto’s coverage and that the notice requirements

1 Now the Workers’ Compensation, Court of Appeals. L. -1976, e. 134,
§ 738.

B72 Ee

of § 176.141 had been met. The finding that liability should be appor-
tioned equally between the insurers also has sufficient evidentiary sup-
port.

The insurer's claim that the board abused its discretion in ordering
assessment of employee’s attorneys fees against them is based on lan-
guage in Lease v. Pemtom, Inc. 305 Minn. 6, 232 N. W. 2d 424 (1975),
in which this court construed § 176.191 as authorizing assessment of an
employee's attorneys fees against the employer-insurer or employers-
insurers liable to pay compensation when the employee is clearly en-
titled to it and the dispute is “solely” between employers-insurers as
to liability for that compensation.

Here the board found that the dispute was “primarily” between the
insurers. The finding is sustained by the record as a whole which clear-
ly permits the inference that despite initial denials of liability, at the
hearing before the compensation judge and thereafter, both insurers
at least implicitly conceded that employee was entitled to compensation.
from one or the other. We are satisfied that from the beginning the sole
issue of real importance was whether there should be apportionment
between. the insurers of liability for compensation to which employee
was clearly entitled. Despite the duty to commence payment of bene-
fits imposed by §§ 176.021, subd. 8, and 176.221, subd. 1, Lyon’s and the
insurers ignored employee’s right to compensation, requiring her to
initiate the proceeding in which they have litigated their liability for
the benefits due her. Consequently, we find the assessment of attorneys
fees consistent with the purposes of § 176.191 and a proper exercise of
the discretion vested in the board by that statute.

Respondent is allowed $350 attorneys fees.

Affirmed.

LaVONNE R. KINGSLEY, BY ERNEST L. KINGSLEY,
HER FATHER AND NATURAL GUARDIAN, AND
ANOTHER v. INDEPENDENT SCHOOL
DISTRICT NO. 2, HILL CITY.

251 N. W. 20 634.

February 25, 1977—No. 46733.

a
Donovan, McCarthy, Crassweller, Larson, Barnes & Magie and Robert
H. Magie III, for appellant.
Ryan & Ryan and Michael F. Ryan, for respondents.

Per Contam.

This is an action to recover damages for injuries suffered by the
minor plaintiff in an accident involving the locker located on the school
premises of defendant. At the time of the accident, the minor plaintiff
‘was 17 years of age and in her junior year. There was a verdict for
plaintiff. Defendant appeals.

‘The school is a three-story structure in which grades 7 through 12 are
conducted. On each floor of the school were 5 or 6 units of 16 small
lockers put together in a manner so as to form a coatrack. A locker sec-
tion is 6 feet 5 1/2 inches in height, 6 feet in width, and 18 inches deep.
The lockers involved in the accident were located in front of a transom
on the third floor near the principal’s office and across the hall from
the library. .

‘There was evidence that, despite school regulations, students placed
books and clothes on top of the lockers. The principal and superin-
tendent of the school testified they walked and patrolled the halls from
time to time to enforce the regulations concerning objects on top of
lockers and children going to the locker during class periods.

LaVonne Kingsley’s assigned locker was on the third floor but not
among those involved in the accident. She testified that on each of the
5 previous school days her coat had been removed from the hanger and

574. be

thrown on the floor or the top of another locker. She reported this fact
to the principal, as did her mother.

Accompanied by her friend while returning to the library from the
home economics room where she received an assignment, LaVonne
noticed her coat in the transom above the locker unit in question.
LaVonne testified she climbed up the locker section by stepping on the
hasp (part of the locking device) and grabbed her coat and threw it
down. After retrieving her coat, she jumped to the floor. Her class ring
on her left finger she “guessed” got caught on a portion of the top of the
locker. All the skin and underlying tissues from the base of the finger
to the top were lost. The finger was completely denuded. All that was
left was the muscle and the bone.

Plaintiff cross-examined the school janitor, who stated that he ex-
amined the locker a day or two before trial and found a protrusion of
metal of about one-sixteenth of an inch at the top left corner of the lock-
er unit, He further stated he found that where the top of the locker met
the angle iron, which is the front structure post of the locker, there was
a depression in which his finger became caught while passing over it.
Defendant offered in evidence some pictures taken at the time of trial
which show that strings from a dusting mop were snared in the depres-
sion or obstruction on top of the locker.

The jury, in answer to separate questions, found defendant negligent
in the supervision of the students and in the maintenance of the school
and that negligence to be the direct cause of plaintiff's injury. The jury
found the minor plaintiff not negligent.

Defendant urges for reversal that there was insufficient evidence to
sustain the jury verdict and that the admission of certain testimony
hereinafter reviewed was an abuse of discretion requiring a new trial.

Substantial evidence was offered of removal and throwing coats
around for some time prior to the accident. There was also evidence of
an insufficient number of usable hangers for each student to properly
hang his coat. It was uncontradicted that plaintiff complained to the
principal about the fact that her coat had been removed on several oc-
casions prior to the accident. No corrective measures were takén. It has
been established in Sheehan v. St. Peter’s Catholic School, 291 Minn.
1, 188 N. W. 2d 868 (1971), that if there is evidence from which the jury
can find that supervision would probably have prevented the accident,
recovery is permitted. The facts warranted the submission of the issue
to the jury, and the resolution by the jury is supported by substantial
evidence.

The school district concedes a school owes a duty to its students to use
reasonable care to inspect and maintain its premises and equipment

Es 575

and to protect its students from an unreasonable risk of harm from the
conditions of the premises and equipment. Annotation, 34 A. L. R. 3d
1166. The school district contends for reversal, however, that there was
no evidence as to what portion of the locker caused the injury or that
the dangerous condition of the locker existed at the time of the ac-
cident. This position completely overlooks the dramatic testimony by
a fellow student that after the occurrence he went to the scene and
picked what remained of LaVonne’s finger off the top of the locker at
the point where she described the accident occurred. This testimony
permitted the inference that the dangerous condition of the locker de-
scribed by the janitor and disclosed in the pictures as in existence as
of the date of trial was the same on the date of the accident. The facts
on the issue of a failure to maintain and inspect adequately supported
the finding on liability.

The trial court permitted over objection certain testimony by a
student to the effect that school officials made a greater effort at disci-
pline during the school year after the accident. The trial court made no
reference to this testimony in its instruction to the jury. The school dis-
trict urges the admission of this testimony was an abuse of discretion re-
quiring a new trial. The rule is stated in Faber v. Roelofs, 298 Minn. 16,
22, 212 N. W. 2d 856, 860 (1973), as follows:

“Where the case is being tried to a jury, trial courts must exercise
great caution in admitting evidence of repairs made or precautions
taken after an accident for the purpose of showing the feasibility of pre-
cautionary measures. However, the trial court is entitled to weigh the
need for such evidence against the risk that the jury may improperly
infer negligence therefrom. Hence, the trial court’s ruling on such evi-
dence will be upheld except upon a showing of abuse of discretion.”

‘This questioned testimony applied only to the issue of negligent su-
pervision. There was otherwise ample evidence of a failure to adequate-
ly inspect and maintain to sustain the verdict. Also, there is no claim
on this appeal that the amount of the verdict was due to passion and
prejudice. Even though we were to conclude that the evidence was im-
properly admitted to support an inference of negligence, no cautionary
instruction against such inference was requested. On this record, we
are satisfied that its admission, if error, did not result in prejudice
justifying a new trial.

Affirmed.

576 EE
IN RE WELFARE OF K. T. N.-
251 N. W. 2d 636.

February 25, 1977—No. 47235.

Gary W. Flakne, County Attorney, and David W. Larson, Assistant
County Attorney, for petitioner.

William R. Kennedy, Chief Public Defender, and Lane Ayres, Assist-
ant Public Defender, for respondent juvenile.

ae

Per CurtaM. .

Petitioner, State of Minnesota, seeks a writ of mandamus requiring
the Hennepin County District Court, Juvenile Division, to vacate its
order staying all proceedings and to direct the adult prosecution to pro-
ceed upon the granting of its motion for reference of the juvenile for
prosecution as an adult. Writ denied.

On January 7, 1976, a delinquency petition was filed in the Hennepin
County Juvenile Court alleging that respondent, K. T. N., had willfully
inflicted great bodily harm upon another. A hearing was conducted on
March 17, 1976, to consider the state’s motion to refer the juvenile for
prosecution as an adult. Minn. St. 260.125. The juvenile court denied the
motion but in its consideration apparently excluded certain evidence
concerning the nature of the crime and an alleged confession by re-
spondent. The state filed its notice of appeal from the order denying
its motion for reference on April 1, 1976.

On July 23, 1976, the respondent stipulated to this court that the relief
requested by the state on appeal, including the exclusion from evidence
of the respondent’s written confession and a police officer’s observa-
tions of the victim at the hospital after the incident, was not contested.
Therefore, by order dated August 6, 1976, the matter was remanded to
the juvenile court for further evidentiary hearings.

On September 7, 1976, a hearing was held in the juvenile court to con-

De 577

sider the remanded evidentiary matters. By order dated September 27,
1976, the court found:

“1, * * * After the mandated consideration of evidence as to the
viciousness of the petitioned offense, it necessarily appears that the
public protection requires a higher degree of restraint than is presently
available within the Juvenile Justice System.

“2. The motion for reference is granted provided however that the
granting is stayed, pursuant to dictum in the decision of the Supreme
Court in In Re I. Q. S. (June 4, 1976), upon condition that:

“a, Respondent agree that the matter be continued until March 29,
1977.

“b, Respondent voluntarily waive his right to a speedy trial.

“ce. Respondent concur in reasonable discovery procedures deemed
necessary by Petitioner to preserve evidence.

“d. Respondent waive his right of privacy under Minnesota Statutes
260.151, Subd. 2.

“e, Respondent conforms to and participates in such disposition as
may be made of him within the limits of Minnesota Statutes 260.185
after hearing on October 18, 1976, at 11:00 a. m., pursuant to Hennepin
Juvenile Court Rule 5.7.

“In the event Respondent declines to accept the foregoing conditions,
the Motion for Reference will be granted unless Respondent returns
the matter to the Supreme Court.”

On. September 30, 1976, the subject juvenile through his attorney signed
the waiver contemplated by the order.

On September 30, 1976, the county attorney filed notice of intent to
prosecute. For purposes of the instant petition, the state expresses con-
cern that the proposed dispositional hearing to be held by the juvenile
court pursuant to Hennepin County Juvenile Court Rule 5.7 will, in ef-
fect, allow jeopardy to attach and successfully preclude any subsequent.
adult prosecution. Breed v. Jones, 421 U. S. 519, 95 S. Ct. 1779, 44 L. ed.
2d 346 (1975). This result is, it asserts, wholly inappropriate because
the juvenile court has no jurisdiction once the court has held that the
child cannot be treated with adequate protection for the public.

Although the language employed by the juvenile court purports to
grant the motion of the state for reference, subsequent confusing
phraseology requires our conclusion that the order is interlocutory in
character. This conclusion is based upon the analysis of the waiver pro-
visions of the order indicative of the court’s intent to employ flexibility
in the disposition of the matter. It appears to this court that the
juvenile court anticipated the implementation of programs within the

578 es

juvenile system which would offer rehabilitative alternatives designed
to aid in the treatment of this particular juvenile. .

Conceivably, the court has thus chosen to defer the final reference
decision for the 6-month period to either allow contemplated rehabilita-
tive programs to materialize, or to enable respondent to participate in
certain preadjudication diversionary programs known to the court.
Either alternative, absent a showing by the petitioner of a violation of
due process or procedural irregularity, is a proper exercise of the broad
discretion of the juvenile court. In re Welfare of I. Q. S. 309 Minn. 78,
244 N. W. 2d 30 (1976).

As there is no present jurisdiction by virtue of which the state can
prosecute the child as an adult, the remedy of a writ of mandamus is
premature and therefore inappropriate. At such time when. the condi-
tional order shall become final, the state may take appropriate action
pursuant to Minn. St. 260.125, subd. 1, and 260.291, subd, 1.

The juvenile court is, however, cautioned that our pronouncement
in In re Welfare of I. Q. S., supra, to the effect that detailed findings
should be employed to enable the reviewing court to determine the pre-
cise basis of the orders, was designed to facilitate effective review of
those decisions. Full compliance is urged to accomplish that review.

Writ denied.

SUSAN E, DOEBBER v. LAUREN BITZAN.
251 N. W. 2d 652.

March 4, 1977— No. 46691.

Donald C. Hanson, for appellant.
Robert M. Hegg, Assistant County Attorney, for respondent.

Ll 579

* Pzr CorIAM. . ~

This isa proceeding for the determination of* paternity under
Minn. St. c. 257. Defendant, who was found by a district-court jury’ to
be the father of the infant in question, appeals from an order deny-
ing a new trial; and we affirm. No useful purpose would be served
by restating the evidence or discussing the issues in detail. The evi-
dence supports the verdict and we find no error.

Affirmed.

STATE v. JON MICHAEL GEGENFURTNER.
251 N. W. 2d 694.

March 4, 1977—No. 46160.

| errr
C. Paul Jones, State Public Defender, and Gregory A. Gaut, Assistant
State Public Defender, for appellant.
Warren Spannaus, Attorney General, Keith M. Brownell, County
Attorney, and John E. DeSanto, Assistant County Attorney, for re-
spondent.

Pn Curiam.

Defendant was found guilty by a district court jury of unauthor-
ized use of a motor vehicle, Minn. St. 609.55, subd. 2,1 and was sen-
tenced to a maximum term of 3 years in prison. Appealing from the
judgment of conviction defendant contends that there was as a mat-
ter of law insufficient evidence of guilt and that the trial court erred

1 Minn. St. 609.55, subd. 2, provides: “Whoever intentionally takes or
drives a motor vehicle without the consent of the owner or his author-
ized agent may be sentenced to imprisonment for not more than three
years or to payment of a fine of not more than $3,000, or both.”

580 Le

in failing to submit the included offense of riding in a motor vehicle
driven by another without the owner’s permission, Minn. St. 609.605-
(10).2 We affirm.

We have reviewed the evidence and find that it fully supports the
verdict. We also find that under the facts of this case defendant would
have been entitled to submission of the lesser included offense if he
had requested it, State v. Gafner, 283 Minn. 466, 168 N. W. 2d 680
(1969), and the trial court on its own could have submitted the of-
fense even if defendant had not requested it, State v. Leinweber, 303
Minn, 414, 228 N. W. 2d 120 (1975). However, defendant did not request
submission or object to the failure of the court to do so, and there-
fore he must be deemed to have waived the issue for appeal. State v.
Jordan, 272 Minn. 84, 136 N. W. 2d 601 (1965).

Affirmed.

GORDON GENE OBERMEYER v. SCHOOL BOARD,
INDEPENDENT SCHOOL DISTRICT NO. 282.

251 N. W. 2d 707.

March 11, 1977—No. 46897.
|
Wetherbee & Baker, and Jack Baker, for appellant.

Peterson, Popovich, Knutson & Flynn and James E. Knutson, for
respondent.

2 Minn. St. 609.605 provides in part: “Whoever intentionally does any
of the following is guilty of a misdemeanor:
ee OK KOK
“(10) Without the permission of the owner, tampers with or gets
into or upon a motor vehicle as defined in section 609.55, subd. 1, or
rides in or upon such motor vehicle knowing it was taken and is being
driven by another without the permission of the owner.”

Perr CuriaM.

Appellant, Gordon Gene Obermeyer, appeals from an order of the
district court quashing a writ of certiorari for lack of jurisdiction.
We affirm.

On July 29, 1975, respondent school board passed a resolution pro-
posing to immediately discharge appellant from his employment as a
teacher in the school board’s district. Minn. St. 125.12, subd. 8. The
resolution provided that appellant be given notice of the proposed
discharge and his right to a hearing. Upon appellant’s request, a
hearing was conducted on August 20, 1975. Pursuant thereto, on Au-
ust 22, 1975, appellant was discharged from, his employment.1 The fi-
nal resolution for discharge was served upon appellant on August 23,
1975.

Appellant then petitioned the district court for a writ of certio-
rari. On October 22, 1975, 60 days after service upon, appellant of
‘the resolution for discharge, the order for the writ and the writ of
certiorari were served upon the chairman of the school board, Rob-
ert Dircks, by leaving them at Dircks’ home with his wife. At no time
was ‘the petition, order, or writ served personally upon the chair-
man, any member of the school board, or the superintendent of
schools within the 60-day limitation of Minn. St. 606.02.

Respondent moved the district court to quash the writ of certio-
rari for lack of jurisdiction upon appellant’s failure to comply with
the procedural requirements of §§ 606.02; 606.03; and 606.05. The in-
stant appeal followed ithe order of the district court quashing the
writ of certiorari.

The sole issue presented is whether substitute service upon the
wife of the chairman of respondent school board is proper within
the requirements of § 606.02 and Rule 4.03(e), Rules of Civil Proce-
dure.

- Rule 4.03(e), Rules.of Civil Procedure, designates those persons
capable of accepting service on behalf of the public corporation.? Un-

1This was after his plea \of guilty to taking indecent liberties with
a minor male student as is more fully detailed in Obermeyer v. School
Board, Ind. Sch. Dist. No. 282, 311 Minn. 232, 247 N. W. 2d'919 (1976).
2 Rule 4.03(e), Rules of Civil Procedure, provides: “Service of sum-
mons within the state shall be made as follows:
ee ek

“(e) Upon a municipal or other public corporation by delivering a

582° PC

like Rule 4.03(a), which specifically authorizes substitite service‘ upon
an individual “by leaving a copy at his usual place of abode with some
person of.suitable age-and discretion then residing. therein,” Rule
4,03(e), is silent with regard to substitute service.

‘The policy reflected by the enumeration of designated agents of serv-
ice is that those persons are capable of and authorized to act on be-
half of the corporate body. This policy is not advanced by the attempt-
ed service upon the wife of a designated agent.

Therefore, the order of the district court quashing the order for
the writ and the writ of certiorari is affirmed. Kenzie v. Dalco
Corp. 309 Minn, 495, 245 N. W. 2d 207 (1976).

Appellant also challenges the propriety of the failure of the lower
court to conclude as a matter of law that he had satisfied the require-
ment of § 606.08 that the writ be endorsed by a responsible person as
surety for costs. As the lower court order has been affirmed on
other grounds, we need not specifically decide this issue. . .

Affirmed. \ ,

copy.

“(1) To the chairman of the county board or to the county auditor
of a defendant county.

“(2) To the chief executive officer or to ithe clerk of a defendant
city, village or borough.

“(3) To the chairman of the town board or to the tlerk of a de-
fendant town.

“(4) Toany member of the board or other governing body of a de-
fendant school district. -

“(5) ‘To any member of the board or other governing body of a de-
fendant public board or public body not hereinabove enumerated.

“Tf service cannot be made as provided in this Rule 4.08(e), the
court may direct the manner of such service.”

a 583

STEVEN C. LARSON, A MINOR, BY PERCY LARSON,
HIS FATHER AND NATURAL GUARDIAN, AND OTHERS v.
INDEPENDENT SCHOOL DISTRICT NO. 314,
BRAHAM, AND OTHERS.

252 N. W. 2d 128.

March 18, 1977—No. 46424.

Rider, Bennett, Egan, Johnson & Arundel, David F. Fitzgerald, and
William J. George, for appellants.
Jardine, Logan & O’Brien and James J. Galman, for respondent
Lamont.
Gislason, Dosland, Hunter & Malecki, C. Allen Dosland, and Donald
E. Schmidt, Jr., for respondent Peterson.

Heard before Yetka, Scott, Knutson, and Winton, JJ., and consid-
ered and decided by the court en banc.

Per Curiam,
Plaintiffs appeal from summary judgments entered in favor of de-
fendant school district superintendent, James Lamont, and defendant
school principal, Jack Peterson, in an action brought against them,
the school district, and a physical education teacher for personal in-
juries sustained by Steven C. Larson while participating in an eighth

584

grade physical education class. The trial court concluded that on the
basis of the deposition evidence, neither the superintendent nor the
principal could be held liable for the minor plaintiffs injuries. Be
cause this court believes that conclusion to have been premature, the
summary judgments are vacated and the cases remanded to the trial
court.

On April 12, 1971, Larson broke his neck while performing, ap-
parently against his will, a headspring over a rolled mat, a required
activity in his eighth grade physical education class. The injury has
resulted in quadriplegic paralysis.

Lyle H. Lundquist, a first-year teacher with a teaching certificate
in physical education, had been hired by Peterson, the principal of
Braham High School, to take over teaching physical education classes
at the high school on March 10, 1970, when the former teacher was
required to report for military duty. Other than to furnish Lund-
quist with a copy of Curriculum Bulletin No. 11, “A Guide for In-
struction in Physical Education, Secondary Schools, Grades 7-12, Boys
and Girls,” published by the Department of Education, Peterson did
not actively participate in developing, administering, or supervising
the high school physical education program. The deposition evidence
indicates that those matters were left entirely in the hands of Lund-
quist.

The evidence also establishes that at the time the mishap occurred,
Minn. Reg. Edu 162(b) provided that the course of study prescribed
in Curriculum Bulletin No. 11 be taught in every secondary school.t
Curriculum. Bulletin No. 11 contemplated that the described activities
which are taught every year should provide for progression of
skills and introduction of new material at each of the four skill levels
into which the six secondary grades of instruction (grades 7
through 12) were divided. The “recommended scope and sequence by
grades and types of activities” stated in the bulletin describe a head-

1 Minn. Reg. Edu 162(b) stated: “(b) Secondary school course. There
shall be taught in every secondary school the prescribed course of
study prepared and published by the commissioner of education in ac-
cordance with M. S. 121.11, Subd. 7 and M. S. 126.02, which is Curriculum
Bulletin No. 11, ‘A Guide for {Instruction in Physical Education, Sec-
ondary School, Grades 7-12, Boys and Girls” a copy of which shall be
filed with these rules and a copy of ‘which provided each school district
maintaining a secondary school.” The regulation has since been changed
and in its current form makes no reference to Curriculum Bulletin
No. 11.

De 585

spring from a rolled mat as a level III and level IV activity. The bul-
letin also included a “suggested schedule of physical education activi-
ties” which prescribed 6 hours of level I tumbling for the seventh
grade and 6 hours of level II tumbling for the eighth grade. Upon the
material in Curriculum Bulletin No. 11 and the deposition testimony,
plaintiffs contend that Steven was being required to participate in a
level III activity which should not have been introduced before com-
pletion of the level I and level II units. Moreover, he was being com-
pelled to do so against his will and possibly beyond his ability, the lat-
ter in contravention of the safety practices specified in the bulletin.

Plaintiffs contend that both the superintendent of schools and the
high school principal were charged by reason of their respective
positions with affirmative duties of care in supervising the physical
education program, its formulation and implementation, for the pur-
pose of ascertaining that the program would comply with all appli-
cable safety requirements, standards and practices. Although nei-
ther Lamont nor Peterson disputes the general rule that school au-
thorities have a duty to exercise reasonable care and supervision
for the safety of children under their control, each contests his lia-
bility to plaintiffs in this case. The trial judge agreed with both.

Extensive discovery was undertaken before trial, including deposi-
tions from the various parties, witnesses to the incident, the super-
visor of health, physical education, and safety for the Minnesota State
Board of Education, superintendents of neighboring school districts,
principals of nearby high schools, and physical education experts.
The summary judgment motions were argued to the trial judge on
the day trial was to have commenced. The motions were granted in
a written order and memorandum, and judgments entered on the
same date. At the time the deposition of Melvin Norstad, superintend-
ent of schools for Independent School District No. 911, Cambridge,
Minnesota, and Conway Thompson, principal of a junior high school
in School District No. 911, had not been filed and thus could not have
been considered. The testimony of each bore directly upon the issues
of liability which the trial court resolved against plaintiffs by the or-
der granting summary judgment. Whether reading the deposition
testimony of Norstad and Thompson would have caused the trial
judge to come to a different conclusion we do not know, but clearly
that testimony should have been considered before a ruling was made
upon the motions.

Moreover, this court is not convinced that the case is free from
disputes of fact concerning either the circumstances leading to the

586 a

minor plaintiff's injuries or the duties and responsibilities of defend-
ants Lamont and Peterson. Summary judgment has been character-
ized by this court as a “blunt instrument” that should not be used to
resolve issues when. doing so necessitates answering questions of law
before the rights of the parties can fairly be determined. We repeat
that summary judgment should be used only when it manifestly ap-
pears that no fact issue is involved and it, therefore, is neither de-
sirable nor necessary to inquire into the facts for the purpose of
clarifying the application of the law. Donnay v. Boulware, 275 Minn.
87, 144 N. W. 2d 711 (1966). Here it cannot be said that no fact issue is
involved. Nor could it fairly be maintained that a thorough explora-
tion of the facts for the purpose of clarifying application of the law is
neither desirable nor necessary.

This court has also stated that even if the state of the record leads
one to suspect it to be unlikely that one party or another will prevail
upon trial, that fact is not a sufficient basis to refuse that party a day
in court concerning issues not shown to be sham, frivolous, or so in-
substantial that trying them would be an exercise in futility. Whisler
v. Findeisen, 280 Minn. 454, 160 N. W. 2d 153 (1968); Dempsey v. Jaros-
cak, 290 Minn. 405, 188 N. W. 2d 779 (1971). So here, it cannot fairly be
said that the issues raised by plaintiffs’ claims against defendants La-
mont and Peterson are sham, frivolous, or so insubstantial that try-
ing them would be an exercise in futility. For that reason and be-
cause it is not absolutely clear that there are no disputed questions of
material facts involved in plaintiffs’ claims against those defendants,
the summary judgments granted herein must be reversed and the
case remanded for trial.

Reversed and remanded.

[|
JUNE H. BARROWS v. MAZALTOV'S, INC.
252.N. W. 2d 130.

March 18, 1977—No. 46404,

Faegre & Benson, Gordon B. Conn, Jr., and Joel E. Miller, for ap-
pellant.

Leonard, Street & Deinard, George F. McGunnigle, Jr. and ‘Eldon
J. Spencer, Jr., for respondent.

ll

Per Curiam.

Plaintiff, June H. Barrows, purchased from defendant, Mazaltov’s,
Inc., an original design and materials for a needlepoint rug. The de-
sign embodied a floral pattern on a beige background. The yarn
which plaintiff incorporated into the background varied in color.
Consequently, plaintiff instituted this action for damages, alleging
breach of contract, breach of implied warranties of merchantability
and fitness (Minn, St. 336.2-314 and 336.2315), breach of express war-
ranty (Minn. St, 336.2-313), and fraud. The case was tried to the court
without a jury. Plaintiff prevailed upon the contract and warranty
grounds. The court found that the value of the rug as warranted
was $14,000 and its value as made was $7,000. Accordingly, it awarded
plaintiff $7,000. Defendant appeals from the judgment.

We find no reversible error.

Affirmed.

IZAAK WALTON LEAGUE OF AMERICA ENDOWMENT, INC. v.
STATE, DEPARTMENT OF NATURAL RESOURCES.

252 N. W. 2d 852.

March 18, 1977—No. 46878,

588 |

Warren Spannaus, Attorney General, and Donald J. Paquette, Spe-
cial Assistant Attorney General, for appellant.

Popham, Haik, Schnobrich, Kaufman & Doty, Raymond A. Haik,
and James R. Steilen, for respondent.

Babcock, Locher, Neilson & Mannella, James M. Neilson, Bruess,
Hamerston, Bye & Boyd, Charles H.. Andresen, David P. Sullivan
and George Maloney, amici curiae, seeking reversal.

Warren Spannaus, Attorney General, iC. Paul Faraci, Deputy At-
torney General, Philip J. Olfelt, Assistant Attorney General, and
Steven G. Thorne, Special Assistant Attorney General, for Attorney
General, amicus curiae, seeking affirmance.

Heard before Sheran, C. J., and Rogosheske, Peterson, Kelly, Todd,
Scott, and Stahler, JJ., and considered and decided by the court en
banc.

Prr Cursum.

The State of Minnesota, Department of Natural Resources (DNR),
appeals from a summary judgment entered in district court order-
ing specific performance by the state of a contract for the purchase
of certain real estate owned by plaintiff, Izaak Walton League of
America Endowment, Inc. (League).

The factual posture of this case, for the most part stipulated, is
uncomplicated. The League owns in fee certain land located in Itas-
ca County, Minnesota. Title to that realty was acquired from the state
through the Commissioner of Revenue pursuant to Minn. St. 282.01
to 282.12, governing the sale of tax forfeited land. The abstract of ti-
tle to the property reveals that prior to 1941 the land had been
owned by one August Grandsinger. In that year the real estate tax-
es became delinquent and proceedings were initiated to enforce pay-
ment. Judgment was entered in those proceedings on March 13, 1941.

On December 17, 1949, there was filed a certificate of forfeiture
pursuant to Minn. St, 281.23, subd. 8. That certificate recites the de-
tails of the tax forfeiture proceedings and indicates that the per-
iod of redemption expired without redemption being made. No other
facts regarding the forfeiture proceedings appear of record. Some,
if not all, of the Itasca County Auditor’s records pertaining to the
tax forfeiture were destroyed pursuant to court order in 1970.

Title to the property vested in the state upon the expiration of the
redemption period. On May 2, 1975, the League purchased the prop-
erty in order to retain and protect it until such time as the appropriate

Ee 589

public agency determined to obtain the property for wildlife habitat.
The League received a tax deed from the Commissioner of Revenue.
Thereafter, the Commissioner of Natural Resources sought to acquire
the land pursuant to Minn. St. 97.481 for wildlife purposes, and 7
months after the League had purchased the property, the DNR entered
into an option contract te buy the property back from the League. '

‘The option contract requires the League to “give a good and market-
able title in fee simple to said property, free and clear of all taxes and
encumbrances, and [to]eonvey the same by warranty deed.” By letter
dated December 8, 1975, the DNR exercised its option. By letter dated
December 15, 1975, the DNR, objected to the state of the title held by the
league, stating that it was not marketable title in that it depended upon
a tax judgment sale certificate less than 40 years old. The League then
commenced this action to compel specific performance of the contract.

The district court found the title to be marketable and ordered judg-
ment requiring the state to perform the option contract. The state
(DNR) appeals from that judgment. We dismiss the appeal for failure
to present a justiciable controversy.

The existence of a justiciable controversy is prerequisite to adjudica-
tion. The judicial function does not comprehend the giving of advisory
opinions. No controversy is presented, absent a genuine conflict in the
tangible interests of opposing litigants. Because the existence of a
justiciable controversy is essential to this court’s exercise of jurisdic-
tion, it may always raise the issue on its own motion. County Board of
Education v. Borgen, 192 Minn, 612, 257 N. W. 92 (1984); Seiz v. Citi-
zens Pure Ice Co. 207 Minn. 277, 290 N. W. 802 (1940); State ex rel. Smith
v. Haveland, 223 Minn. 89, 25 N. W. 2d 474, 174 A. L. R. 544 (1946); Arens
v. Village of Rogers, 240 Minn. 386, 61 N. W. 2d 508 (1953), appeal dis-
missed, 347 U. S. 949, 74 S. Ct. 680, 98 L. ed. 1096 (1954).

The parties entered into the purported contract at issue less with the
intent that it be performed than with the purpose of creating a vehicle
by which the parties could gain a judicial statement regarding the gen-
eral marketability of tax titles. At oral argument it was made clear that
the League was aware of the state’s longstanding policy of objecting
to tax titles as being unmarketable. Moreover, the League was un-
questionably aware of the status of the title since it received its deed
from the Commissioner of Revenue. As another indication of the lack
of real controversy in this action, the League at no time asserted any
claim that the state should be estopped from objecting to title because
of the structure of the transaction.

For its part, the state has assumed the anomalous posture of appear-
ing through the office of the attorney general as the appellant, seeking

reversal.of the lower court’s order, and as an amicus curiae, seeking
affirmance, Although we ourselves erred in granting the state’s applica-
tion to appear as an amicus in these circumstances, the fact that the
application was even made underscores the absence of real controversy
and, instead, the basic purpose of seeking an advisory opinion.

We are aware that the marketability of tax titles, and their validity
generally, is a topic of much concern to the profession and to the public.
The state has a strong interest in being able to collect taxes due it by
a sure and final method. The current statutory scheme does not in un-
mistakable terms provide that desired measure of certainty and finali-
ty. See, Note, 1 Wm. Mitchell L. Rev. 1. The possible or preferred solu-
tions, however, are more properly directed to the legislature. Legisla-
tion has in the past been proposed or undertaken in the legislature to
limit even more the possible grounds of challenge to the validity of tax
forfeiture proceedings and to restrict the period of time within which
claims of invalidity may be asserted, subject to any constitutional
limitations.1 The statutory scheme is complex, and the variety of fac-
tual situations in which objections might arise may well be many.
Whereas the legislature may anticipate and deal with these practical
considerations in a comprehensive way and consistent with a funda-
mental determination of public policy, this court is confined to a more
fragmentary determination on a case-by-case basis in the context of the
specific facts of a case and a clear expression of legislative intent.

We accordingly dismiss the appeal and remand to the district court
for reconsideration consistent with this opinion.

1 The determination of what jclaims to real property should be barred.
by statutory limitations as to permissible grounds for asserting those
claims, or the time for bringing such claims, is primarily for legislative,
not judicial, determination. The restraints upon such legislation, and
tax forfeiture proceedings generally, are only those imposed by the
state and Federal constitutions, which require that such statutes
comport with the requirements of due process of law. See, Saranac
Land, & c., Co. v. Comptroller of N. Y. 177 U. S. 818, 20 S. Ct. 642, 44
L, ed. 786 (1900); Wichelman v. Messner, 250 Minn. 88, 83 N. W. 2d 800

(1957). See, also, Pearson v. Dodd, 429 U. S. 396, 97 S. Ct. 581,.50 L. ed.
«2d 574 (1977).

De 591

WALTER M. GASPORD AND ANOTHER v.
WASHINGTON COUNTY PLANNING COMMISSION.

252 N. W. 24.590.

March 25, 1977—No. 46969.

Robert W. Kelly, County Attorney, and Jack W. Clinton, Assistant
County Attorney, for appellant.
George R. Roedler, Jr., for respondents.

Per Curiam.

Walter M. Gaspord and Josephine M. Gaspord brought this action to
compel the Washington County Planning Commission to issue them
a septic tank sewage system permit.1 The Washington County District
Court granted their motion for summary judgment but later modified
the judgment to allow the commission to issue a permit which would
order plaintiffs to install a drain field and fill over it if necessary. The
commission claims the court erred in granting the motion for summary
judgment. We agree.

Summary judgment is properly rendered only where there is no
genuine issue of material fact in dispute and where a determination of
the applicable law will resolve the controversy. Rule 52.02, Rules of
Civil Procedure. Review of the record in this case discloses that there
are issues of material fact making summary judgment improper.

Some facts are undisputed. In 1974 plaintiffs purchased their lots,
which are zoned residential and lie in an area for which a plat approved
by the commission was recorded in November 1972. No city sewer is
available in the area, and the commission knew when it approved the
plat that homes built there would require septic tanks. Prior to ap-

1 Other claims asserted in plaintiffs’ complaint are not in issue.

592 a

proval of the plat, percolation rates on plaintiffs’ property were de-
termined to be satisfactory. Tests conducted after plaintiffs’ purchase
also showed adequate percolation rates on the lots and disclosed that
the water table in the areas where the tests were conducted was 40
inches below the surface. The size of the lots is conceded to meet per-
mit requirements. On these facts, the court found the commission’s re-
fusal to issue a permit was arbitrary and granted plaintiffs summary
judgment.

The commission moved to vacate the judgment, contending its re-
fusal to issue the permit was justified because plaintiffs had
not shown that the water table level on their land met the re
quirements of Washington County Development Code, § 405.05, which
provides in part:

“Additional criteria for judging soil suitability.

(1) In areas of shallow ground water, the depth of the water
table shall be determined. No soil absorption system shall be installed
in an area where the water table is at any time less than six and one
half (6 1/2) feet below ground level or four (4) feet below the bottom
of the drain field trench.

(2) A modification of the percolation test may be used when the
percolation test procedure has been previously used and knowledge
is available on the character and uniformity of the soil.”2

The commission asserted that seepage from a septic tank must
drain through 4 feet of soil for adequate purification and that plain-
tiffs had not shown that the water table level on their property
would permit this. Interrogatories filed prior to the motion to va-
cate the judgment disclosed that the commission had granted seven
permits in the platted area but none for a lot with a water table
level of 40 inches. Several permits had required installation of drain
fields and fill over them if necessary. One system for which a permit
had been granted failed because of a flexible water table.

In response to the commission’s motion, the court ordered the
judgment amended, apparently concluding that the commission could
require installation of a drain field which would purify the seepage
from a septic tank as effectively as a system which complied with the
requirements of § 405.05 of the development code. There is, however,
no evidentiary basis in the record for this conclusion nor for the im.
plicit conclusion that the commission’s denial of the permit bore no

2 The Minnesota Individual Sewage Disposal System (Code contains an
identical provision.

as 593

substantial relationship to the public health. See, County of Freeborn
v. Claussen, 295 Minn. 96, 100, 203 N. W..2d 323, 326 (1972).

‘We conclude that on this record the judgment must be reversed
and the matter remanded for trial, at which plaintiffs will have the
opportunity to establish that they are entitled to a permit either by
establishing that the water table level in some area of their proper-
ty meets the requirements of § 405.05 or that a satisfactory sewage
system can be installed by any method such as use of fill over the
drain field area.

Reversed.

STATE v. LOUIS BOYKIN.
252 N. W. 2d 604.
April 8, 1977—No, 46701.

Connolly & Heffernan and John S. Connolly, for appellant.

Warren Spannaus, Attorney General, William B. Randall, County
Attorney, and Steven C. DeCoster, Assistant County Attorney, for
respondent.

Per Curiam.

This is an appeal by defendant from a judgment of conviction of ag-
gravated assault, Minn, St. 609.225, subd. 2, and indecent liberties,
§ 609.296. Defendant was also charged with aggravated rape, § 609.291,
but the jury acquitted him of that charge. Issues raised by defendant
are (1) whether the trial court erred in permitting the prosecutor
to cross-examine him about a statement he made to police after be-
ing arrested, and (2) whether the trial court’s instructions on rea-
sonable doubt were inadequate. We affirm.

Defendant’s exculpatory statement to police was ruled admissible
after an omnibus hearing, but the prosecutor did not offer any evi-

594 —

dence about the statement during the state’s case in chief. Defense
counsel, while examining defendant, opened the door to this matter
by questioning defendant in detail about what he had told police. Then
on cross-examination the prosecutor asked defendant a few more
questions about the matter. Although defendant must be deemed to
have waived the right to raise this issue on ‘appeal, we note gratui-
tously that under Harris v. New York, 401 U. S. 222, 91 S. Ct. 643, 28
L. ed. 2d 1 (1971), the prosecutor could have used defendant’s state-
ment for impeachment purposes even if the statement.had been ruled
inadmissible. See, State v. Hill, 309 Minn. 206, 244 N. W. 2d 728 (1976),
and State v. Gabler, 294 Minn. 457, 199 N. W. 2d 439 (1972).

Defendant’s complaint about the instruction on reasonable doubt is
that the trial court refused to include a requested instruction stating
that “[a] reasonable doubt exists whenever, after careful and impar-
tial consideration of all the evidence in the case, the jurors do not feel
convinced to a moral certainty that a defendant is guilty of the
charge.” In all other respects the trial court’s instructions on rea-
sonable doubt were identical to those recommended in 1 Devitt and
Blackmar, Federal Jury Practice and Instructions (2 ed.) § 11.01. As
such, we believe the instructions were more than adequate. See, State
v. Shotley, 305 Minn. 384, 233 N. W, 2d 755 (1975). And see United States
v. Lawson, 507 F. 2d 433 (7 Cir. 1974), certiorari denied, 420 U. S. 1004,
95 S. Ct. 1446, 43 L. ed. 2d 762 (1975), upholding a lower court’s re-
fusal to use the “moral certainty” language. Specifically, the court in
that case stated:

“Because of the very commonness of the words, the straining for
making the clear more clear has the trap of producing complexity
and consequent confusion. That this difficulty may be surmounted is
evidenced by the attempts which have been approved, although the
language of approval has frequently implicitly suggested the difficul-
ties of articulation. That the difficulties may be surmounted, how-
ever, does not mean in our opinion that the effort has to be made.

“The essential aspect of the matter it appears to us is that the jury
clearly understand that there must be proof persuasive beyond a
reasonable doubt. Defining the term should be at the option of the
trial judge even though a defining instruction is tendered. Lack of
definition would not appear to be prejudicial.” 507 F. 2d 442.

Affirmed.

Le 595
JAMES M. ZOLLER v. ELLIOTT REALTY AND ANOTHER.
WISCONSIN NATIONAL LIFE
INSURANCE COMPANY, INTERVENOR.

252 N. W. 2d 857.

April 8, 1977—No, 47033.

Johnson, Goetieman, Anderson & Laverdiere, Richard A. Laverdiere,
and Wayne R. Johnson, for relators.

Henry W. Haverstock, Jr., for respondent.

Cragg & Bailly and Robert S. Cragg, for intervenor-respondent.

ee

Per Curiam.

Relators, Elliott Realty and its compensation insurer, St. Paul Fire
and Marine Insurance Company, seek review of a decision of the Work-
ers’ Compensation Board determining that James M. Zoller was El-
liott’s employee at the time of an accident which resulted in injury to
his back. The board ordered relators to reimburse Zoller and Wisconsin
National Life Insurance Company, which had intervened in the pro-
ceeding, for medical expenses they had paid.? Relators contend the find-
ings that an employment relationship existed when the accident oc-
curred, that the injury arose out of and in the course of Zoller’s employ-
ment, and that Elliott had received timely notice of injury lack the
requisite evidentiary support. We affirm.

After being employed by Elliott for several months as a real estate
agent, Zoller resigned in August 1973. He told Gary Hilliott, the presi-

1 Now the Worker's Compensation Court of Appeals. L. 1976, c. 134,
978.

2The nature and extent of Zoller’s disability was reserved for later
determination.

‘596 es

dent of Elliott Realty and Zoller’s supervisor, that despite the resigna-
tion he would complete unfinished details of his work and would attend
closings called for by purchase agreements he had procured. On October
24 he drove some purchasers to a closing and then to their new home.
He accepted their invitation to see the house and stayed for a short
visit. As he was leaving, he fell and injured his back. There was evi-
dence that neither Hlliott nor Zoller would receive a commission until
the closing was completed, that an agent’s presence at closings was
either. required or encouraged by Elliott, and that his being present
benefited both the agent and Elliott. These facts as well as evidence
that Elliott encouraged its agents to maintain a friendly relationship
with their clients furnish adequate evidentiary support for the findings
that Zoller was an, employee and that his injury arose out of and in the
course of his employment.

While there is conflicting evidence on whether Elliott received notice
of injury within 30 days of the incident, as is required by Minn. St.
176.141, the record, including the employer’s first report of injury, also
adequately supports the finding that Elliott received timely notice.’

Respondent Zoller is allowed $350 attorneys fees.

Affirmed.

Mr. Jusricz Oris took no part in the consideration or decision of this

case.

STATE v. JOHNNY LEE MASTER.
252 N, W. 2d 859.
April 8, 1977—No. 46291.

3 The report of injury, prepared by Gary Elliott’s secretary in June
1974 from information Zoller supplied, included a recital that Gary El-
liott received notice of the injury on November 15, 1973. Elliott denied
knowledge of this recital but admitted authorizing his secretary to file
the report. The board properly considered it. Minn. St. 176.231, subd.
9. .

a 597

C. Paul Jones, State Public Defender, for appellant.
Warren Spannaus, Attorney General, William B. Randall, County At-
torney, and Darrell C. Hill, Assistant County Attorney, for respondent.

ee

Pr Curiam.

Defendant was found guilty by a district court jury of aggravated as-
sault, Minn. St. 609.225, subd. 1, and was sentenced by the trial court
to a minimum 3-year term in prison pursuant to Minn. St. 1974, § 609.11,
subd. 1. On this appeal from judgment of conviction defendant contends
that there was, as a matter of law, insufficient evidence of his guilt and
that the trial court erred (a) in permitting the prosecutor to impeach
him by means of a prior conviction, (b) in the way it handled a request
by the jury for information, and (c) in sentencing him to a 3-year mini-
mum term pursuant to Minn. St. 1974, § 609.11, subd. 1. We affirm,

There is no merit to ‘the issue relating to the sufficiency of the evi-
dence, and defendant's trial counsel expressly waived any right to chal-
lenge on appeal the manner in which the court handled the jury’s
request for information.

We agree with defendant that the 8-year-old crime about which the
prosecutor was permitted to question him arguably had very little rele-
vance to the truth-seeking process or to defendant’s present character,
but this is not a case like State v. Stewart, 297 Minn. 57, 209 N. W. 2d
913 (1973), where the interests of justice warrant granting the de-
fendant a new trial on this ground.

In sentencing defendant to a minimum 3-year term the trial court re-
lied on Minn, St. 1974, § 609.11, subd. 1. Defendant contends that the
court should have sentenced defendant only to a minimum of 1 year
and 1 day, as required by Minn. St. 1975, § 609.11, subd. 1, because the
1975 amendment became effective on August 1, 1975, and the trial oc-
curred after that date. However, the key date is not the trial date put
the date on which the offense occurred. Here the offense occurred dur-
ing the period between August 1, 1974, and August 1, 1975, when the
statute pursuant to which defendant was sentenced was effective. See,
State v. Spencer, 311 Minn. 222, 248 N. W. 2d 915 (1976).

Affirmed.

98 Es

STATE v. FAUSTINO C. GALAN.

a

253 N. W. 2d 386.

April 15, 1977—No. 46402.

C. Paul Jones, State Public Defender, for appellant.
Warren Spannaus, Attorney General, Richard G. Mark, Assistant
Attorney General, Richard G. Evans, Special Assistant Attorney Gen-
eral, and Harlan L. Nelson, County Attorney, for respondent.

Per Curiam.

Defendant was found guilty by a district court jury of a charge of
aggravated assault, Minn. St. 609.225, subd. 1, and was sentenced by the
‘trial court to a maximum of 10 years in prison. On this appeal from
judgment of conviction, defendant does not challenge the sufficiency of
the evidence but contends that he should be granted a new trial be-
cause of the allegedly improper admission of certain rebuttal testi-
mony, and because of an arguably improper statement by the prose-
cutor in his closing argument. Defendant, by his failure to object,
waived these issues and accordingly we do not reach them.

Affirmed.

a
STATE v. LONNIE BOGGHSS.
253 N. W. 24.146,
April 15, 1977—No. 46340.

a 599

C. Paul Jones, State Public Defender, for appellant.

Warren Spannaus, Attorney General, William B. Randall, County
Attorney, and Steven C. DeCoster, Assistant County Attorney, for
respondent.

Per Curiam.

Defendant was found guilty by a district court jury of a charge of
aggravated robbery for his role as driver of the getaway vehicle
used in the robbery and was sentenced by the trial court to a 3- to
10-year term in prison, Minn. St. 1974, §§ 609.11 and 609.245. In this ap-
peal from judgment of conviction, defendant contends (1) that the
evidence of his guilt was insufficient as a matter of law; (2) that the
trial court improperly assumed a partisan role primarily by inter-
fering with defense counsel's examination of witnesses even though
the prosecutor had not objected; (3) that the trial court erred in
instructing the jury on flight and the use of a false name by defendant
when arrested; and (4) that the prosecutor improperly introduced
evidence rebutting the testimony of one of the defense witnesses.
‘There is no merit to the first issue, and defendant waived his right
to raise the other issues by failing to object or otherwise raise them
in the court below.

Affirmed.

[|
JAMES D. OSTERKAMP v. CRAFTSMAN PRESS AND ANOTHER.
STATE TREASURER, CUSTODIAN OF SPECIAL
COMPENSATION FUND.
253 N. W. 2d 147.

April 15, 1977—No. 46911.

600 Es

Van Eps & Gilmore and Michael Forde, for relators.
Warren Spannaus, Attorney General, and Kenneth McCoy, Special
Assistant Attorney General, for respondent state treasurer,

ee

Pur Curiam.

Certiorari to review a decision of the Workers’ Compensation
Board denying relators, Craftsman Press and its insurer, Liberty
Mutual Insurance Company, reimbursement from the Special Com-
pensation Fund pursuant to Minn. St. 176.131, subd. 1. We affirm.

Employee injured his lumbar spine in an industrial accident in
1968. Pursuant to a stipulation he was awarded compensation for a
15-percent permanent partial disability of the back although his doc-
tor rated the disability at 20 percent. In 1973, while in the employ of
relator Craftsman Press, employee fell and sustained injury in the
cervical, thoracic, and lumbar areas of his back. Relators have paid
compensation and retraining benefits. The board denied their claim
for reimbursement from the Special Compensation Fund on the
grounds (1) that employee was not formally registered with the com-
missioner of the Department of Labor and Industry pursuant to
Minn. St. 176.131, subd. 4, and (2) that employee’s second injury had
not resulted in substantially greater disability because of his prior
physical impairment. We affirm on the second ground.

The board’s finding that employee’s physical impairment “was not
formally registered with the, Worker’s Compensation Division as re-
quired by [§] 176.131, Subd. 4” must be rejected. Employee was
“deemed to be registered” under Minn, St. 1969, § 176.131, subd. 4, and
the provision’ for formal registration in the present subd. 4 cannot
affect his status. Stangel v. Lakehead Const. Co. 306 Minn. 86, 235 N. W.
2d 200 (1975). Thus, denial of reimbursement cannot rest on lack of
formal registration.

However, the board’s finding that employee’s disability of the lum-
bar spine following his 1973 injury was not substantially greater be-
cause of his prior physical impairment, if sustained, requires denial
of reimbursement. The burden of establishing that the disability was
substantially greater was upon relators. Flansburg v. Giza, 284
Minn. 199, 169 N. W. 2d 744 (1969). Our review of the record convine-
es us that relators did not meet this burden and that there is credi-
ble evidence to support the board’s finding. Accordingly, the finding

1 Now the Worker’s Compensation Court of Appeals. L. 1976, c. 134,
§ 78. : . :

Es 601

and consequent denial of reimbursement must be affirmed. Grgurich
v. Sears, Roebuck & Co. 301 Minn. 291, 223 N. W. 2d 120 (1974).

Affirmed.
P|
STATE v. DARRELL L. RATHAI.
253 N. W. 2d 148.

April 15, 1977—No. 46738.

C. Paul Jones, State Public Defender, and Gregory A. Gaut, Assistant
State Public Defender, for appellant.

Warren Spannaus, Attorney General, Richard G. Mark, Assistant At-
torney General, Edward M. Laine, Special Assistant Attorney General,
and Arvid L. Wendland, County Attorney, for respondent.

Pur Curiam. .

Defendant was found guilty by a district court jury of charges of kid-
napping and aggravated rape, Minn. St. 609.25 and 609.291, and was sen-
tenced by the trial court to a maximum indeterminate term of 15 years
at the state reformatory. Issues raised by defendant on this appeal from
judgment of conviction are whether identification procedures used by
police created a substantial likelihood of irreparable misidentification
and whether there was, as a matter of law, insufficient evidence
identifying him as the assailant. Our review of the record compels af-
firmance since we find no merit supporting defendant’s claims.
Affirmed.

602 a
STEVEN, WAYNE SHACKELFORD v. STATE.
253 N. W. 2d 149.

April 15, 1977—No. 47097.

|
|

C. Paul Jones, State Public Defender, and Mollie G. Raskind, Assist-
ant State Public Defender, for appellant.

Warren Spannaus, Attorney General, William B. Randall, County
Attorney, and Steven C. DeCoster, Assistant County Attorney, for

respondent.

Prr Curiam.

This is a postconviction proceeding in which petitioner seeks re-
lief from a judgment of conviction based on a negotiated plea of guilty
to an amended complaint charging him with the misdemeanor of-
fense of receiving stolen property in violation of Minn. St. 609.53,
subd. 2, (receiving stolen property reasonably believing but not ac-
tually knowing that the property was stolen). On this appeal from the
order denying relief, petitioner contends that the district court ac-
cepted the plea without interrogating him sufficiently to establish ei-
ther an adequate factual basis or that the plea was knowingly and
intelligently made. We affirm.

The appropriate procedures to be followed by the trial court in
accepting guilty pleas in misdemeanor cases are specified in Rules
15.02 and 15.03, Rules of Criminal Procedure. In this case the trial
court neglected to question petitioner about his understanding of
the rights he was waiving by pleading guilty. However, petitioner
was represented by counsel at the time he entered his plea, so it may
properly be presumed that his counsel advised him of his rights. See,
State v. Propotnik, 299 Minn. 56, 216 N. W. 2d 637 (1974). Further,
counsel testified at the postconviction hearing that in fact he had ad-
vised petitioner of his rights prior to his plea. We hope that in the
future all trial judges will follow the requirements of the rules in

a 603

accepting guilty pleas and thereby help to reduce the necessity of
postconviction proceedings such as this one.

There is no merit to petitioner’s contention that there was an in-
adequate factual basis for his plea.

Affirmed.

Mr, Justice PLunxerr took no part in the consideration or decision of
this case. :