Court Opinion

ID: 2788571
Source: CourtListenerOpinion
Date Created: 2015-03-23 20:06:35.712658+00
Date Added: 2024-06-11T10:52:46.174597
License: Public Domain

This opinion will be unpublished and
                         may not be cited except as provided by
                         Minn. Stat. § 480A.08, subd. 3 (2014).

                              STATE OF MINNESOTA
                              IN COURT OF APPEALS
                                    A14-0706

                               Corval Constructors, Inc.,
                                     Respondent,

                                          vs.

                            FPD Power Development, LLC,
                                    Appellant.

                                Filed March 23, 2015
                                      Affirmed
                                    Larkin, Judge

                             Ramsey County District Court
                               File No. 62-CV-12-4231

Ernest F. Peake, Patrick J. Lindmark, Leonard, O’Brien, Spencer, Gale & Sayre, Ltd.,
Minneapolis, Minnesota (for respondent)

Mark J. Heley, John A. Markert, Stephen F. Buterin, Heley, Duncan & Melander, PLLP,
Minneapolis, Minnesota (for appellant)

      Considered and decided by Halbrooks, Presiding Judge; Johnson, Judge; and

Larkin, Judge.

                       UNPUBLISHED OPINION

LARKIN, Judge

      In this dispute stemming from the construction of a power-generating station,

appellant subcontractor challenges (1) the district court’s grant of summary judgment to
respondent general contractor and its summary dismissal of appellant’s counterclaim,

(2) the district court’s imposition of a sanction against appellant for abusing the subpoena

process, and (3) the district court’s award of certain costs to respondent. We affirm.

                                         FACTS

       Respondent Corval Constructors, Inc. (Corval) contracted with Northwestern

Energy Corporation to serve as a general contractor for the construction of a power-

generating station in Montana. Corval subcontracted part of the work to appellant FPD

Power Development, LLC (FPD).           Under the subcontract, FPD agreed to provide

electrical services and equipment and to install the equipment.

       Although FPD agreed to a fixed price, article six of the subcontract provides for

additional compensation in the event that Corval made project changes during

construction. The subcontract refers to these changes as “directed changes” and sets forth

a detailed procedure that FPD had to follow to obtain additional compensation for such

changes. Of note here, FPD had to submit a written request for a “change order” to

Corval within three days of a directed change. The subcontract states that a request for

additional compensation that “does not fully comply with the [subcontract] shall not be

considered a [c]hange [r]equest under the [s]ubcontract.” The subcontract also states that

FPD is not eligible for additional compensation unless FPD received a written change

order from Corval and that if FPD performed work related to a change without a written

change order, “[FPD] shall be deemed to have knowingly and intentionally waived and

released all claims for additional compensation . . . regardless of any written or verbal

protests or claims by [FPD] to the contrary,” and “[Corval] shall be under no obligation

                                             2
to . . . pay or reimburse [FPD] for any cost or expense related to an [u]napproved

[c]hange.”

       During the course of the project, substantial changes were necessary. Ultimately,

11 plan revisions became part of the subcontract. FPD submitted nearly 150 change-

order requests, and Corval approved most of them. Approximately one-third of the

change-order requests were approved and paid even though FPD did not adhere to the

three-day notice requirement and the parties did not adhere to other aspects of the

change-order process in the written subcontract.

       Weeks after the project was basically complete, FPD submitted several change-

order requests, seeking additional compensation. Many of the items for which FPD

sought compensation had been the subject of dispute and discussion during the project

and some had been partially resolved. Corval denied the change-order requests, partly

because FPD failed to follow the change-order process in article six of the subcontract.

       FPD filed a construction lien against the property on which the power station was

built. Later, Corval commenced the present action for breach of contract and declaratory

judgment, seeking a declaration that it does not owe FPD additional compensation under

the subcontract. FPD counterclaimed, asserting breach-of-contract, unjust-enrichment,

account-stated, and declaratory-judgment claims.            The breach-of-contract and

declaratory-judgment claims are at issue here.1

1
 The district court dismissed FPD’s unjust-enrichment claim under Minn. R. Civ. P. 12.
And FPD notified the district court, in summary-judgment proceedings, that the court
could dismiss its account-stated claim. FPD does not challenge the district court’s
dismissal of those claims.

                                            3
      The breach-of-contract count of the counterclaim states, in relevant part, that:

                     36. FPD complied with the terms of the Contract in
             all respects, including those terms relating to making a claim
             for additional compensation. FPD submitted various change
             order requests to Corval for additional compensation due to
             the issues listed in the paragraphs above, as well as for other
             reasons. Corval approved some of FPD’s change order
             requests[,] but the majority were not approved.

                    37. Despite repeated demands, Corval fails and
             refuses to approve and pay FPD for the legitimate change
             order requests made by FPD and therefore is in breach of the
             terms of the Contract.

      The declaratory-judgment count of the counterclaim states that Corval tendered a

payment bond as substitute security for the construction lien FPD filed and that

             FPD is entitled to declaratory relief determining that Corval is
             in breach of its subcontract agreement with FPD, that FPD is
             entitled to recover damages under its subcontract
             agreement[,] . . . and that FPD is entitled to recover under the
             Bond any portion of its judgment against Corval that remains
             unpaid following entry of final judgment.

      Corval moved to dismiss FPD’s counterclaim under Minn. R. Civ. P. 12.02(e) for

failure to state a claim upon which relief can be granted. As to FPD’s breach-of-contract

claim, Corval argued that “the subcontract is for a fixed price that can only be modified

through written change order requests made prior to completing the work” and that FPD

“failed to provide Corval with any written notice of [the] claimed additional costs until

several months after all of the work was completed.”          In a written memorandum

responding to Corval’s motion to dismiss, FPD argued that it had properly pleaded the

elements of breach of contract.      FPD also argued that Corval’s argument “is not

supported by the language of the Subcontract” because the “plain language of [sections]

                                            4
6.4.1 and 6.4.2 contradicts Corval’s claim that FPD cannot collect for any additional

work that was not authorized by a change order prior to the work proceeding,” and that

the “plain and ordinary meaning of the language in [s]ection 5.3 states that FPD shall be

provided an equitable adjustment for delays and acceleration.”

      At the hearing on Corval’s motion to dismiss, the district court agreed with Corval

that FPD’s pleading did not contain a “common course of dealing” theory. But the

district court denied Corval’s motion to dismiss FPD’s breach-of-contract and

declaratory-judgment claims, stating, “At this point, FPD has pled the [s]ubcontract,

timely compliance with all contractual terms, and Corval’s breach.”

      After discovery was complete, Corval moved for summary judgment. Corval

argued that FPD “ignore[d] material terms of the subcontract” and “all of [its] claims for

extra compensation are contractually barred because the requests were not timely and

FPD had already completed the work prior to obtaining written authorization for the

additional compensation.” In its responsive brief, FPD did not argue that it followed the

change-order process in article six of the subcontract, as it had when defending Corval’s

motion to dismiss under rule 12. Instead, FPD argued equitable-estoppel, waiver, and

contract-modification theories.   FPD asserted that “Corval regularly and repeatedly

ignored and waived the requirements of [s]ection 6.4 with respect to FPD’s changes and

. . . it actively encouraged—even demanded—that FPD do the same.” FPD therefore

argued that “Corval is estopped from enforcing terms of [the] subcontract to defeat FPD’s

claims”; “Corval’s actions and representations modified the [change-order process] thus

                                            5
Corval is estopped from enforcing the requirements of section 6.4 of the subcontract”;

and “Corval unilaterally waived enforcement of section 6.4.2.”

       Corval opposed FPD’s reliance on equitable-estoppel, waiver, and contract-

modification theories, arguing that they were not raised in FPD’s pleading. At the

summary-judgment hearing, the district court questioned whether FPD had raised

modification or equitable estoppel in its counterclaim. FPD suggested that, if the court

was concerned that Corval was not on notice of those theories, FPD should be allowed to

amend its pleading to clarify the theories.

       The district court granted Corval’s motion for summary judgment. In doing so,

the district court explained that its order denying Corval’s motion to dismiss under rule

12 was based on “FPD’s written and oral representations that it plead[ed] nothing more

than a claim for damages based on its compliance and Corval’s breach of the contract as

written” and that its order “is the law of the case.” The district court noted that “FPD did

not plead estoppel properly and never pled waiver.” The district court also noted that

“[a]t no time did FPD move to amend its answer or its counterclaim” and that permitting

FPD to amend would prejudice Corval and “be an exercise in futility.” The district court

therefore refused to consider FPD’s equitable-estoppel, waiver, and contract-modification

theories. The district court also refused to consider testimony that FPD offered from a

former Corval employee, W.K., on the ground that FPD abused the subpoena process.

       The district court dismissed FPD’s counterclaim and ruled that, “with [FPD’s]

counterclaim dismissed, [Corval] is entitled to the relief requested in its complaint.” The

district court therefore granted summary judgment for Corval, declaring that “[FPD] is

                                              6
barred from receiving any additional compensation in connection with the Mill Creek

Generating Station project.” The district court later awarded costs to Corval, including

reimbursement for the expense of securing a bond. This appeal follows.

                                      DECISION

       FPD challenges (1) the district court’s grant of summary judgment for Corval,

(2) the district court’s imposition of a sanction against FPD, and (3) the district court’s

award of costs. We address each issue in turn.

                                              I.

       “A motion for summary judgment shall be granted when the pleadings,

depositions, answers to interrogatories, and admissions on file, together with the

affidavits, if any, show that there is no genuine issue of material fact and that either party

is entitled to a judgment as a matter of law.” Fabio v. Bellomo, 504 N.W.2d 758, 761

(Minn. 1993). Appellate courts “review a district court’s summary judgment decision de

novo. In doing so, we determine whether the district court properly applied the law and

whether there are genuine issues of material fact that preclude summary judgment.”

Riverview Muir Doran, LLC v. JADT Dev. Grp., LLC, 790 N.W.2d 167, 170 (Minn.

2010) (citation omitted).

       At the summary-judgment hearing, FPD conceded that it had not followed the

procedure necessary to obtain additional compensation under the subcontract as written

and “that if FPD is held strictly to the [s]ubcontract as written, Corval’s motion must be

granted.” FPD therefore relied on equitable-estoppel, waiver, and contract-modification

theories to defeat summary judgment.         The district court refused to consider those

                                              7
theories, partly reasoning that it had denied Corval’s request for dismissal under rule 12

“based upon FPD’s written and oral representations that it plead[ed] nothing more than a

claim for damages based upon its compliance and Corval’s breach of the contract as

written.” The district court noted that FPD did not plead “course of conduct equitable

estoppel” or waiver and that it would not allow amendment to include those theories at

that point in the litigation.

       When issues beyond the scope of the pleadings are raised for the first time in a

memorandum in opposition to summary judgment, the district court need not consider

them. See Great Am. Ins. Co. v. Golla, 493 N.W.2d 602, 605 (Minn. App. 1992)

(holding that where a party attempted to revive a claim that it had removed from a

complaint, the district court did not err by not considering the claim when it was raised in

opposition to summary judgment). That is because the pleadings frame the issues for the

district court, and a party is bound by its pleadings unless other issues are litigated by

consent. Id.

       As the district court noted, FPD’s response to Corval’s summary-judgment motion

“sharply departs from its earlier [rule-12] assertion of contract compliance.” In response

to Corval’s motion to dismiss under rule 12, FPD argued that it adequately pleaded

compliance with the plain language of the subcontract. In ruling on Corval’s rule-12

motion to dismiss, the district court noted that the parties’ dispute centered on “whether

the subcontract provides one (the change-order process) or more than one way for FPD to

receive additional compensation due to changes in the work during contract

performance,” referring to FPD’s argument that equitable compensation is possible

                                             8
outside of the change-order process. The district court concluded that the subcontract is

not ambiguous and that “compliance with the change-order process is [FPD’s] sole means

to secure any equitable or additional compensation.”           Notably, the district court’s

memorandum explaining its rule-12 ruling does not mention equitable estoppel, waiver,

or contract modification. The district court ruled that “[a]t this point, FPD has pled the

[s]ubcontract, timely compliance with all contractual terms, and Corval’s breach.”

       The district court’s summary-judgment order explains its rule-12 ruling as follows:

“The motion to dismiss was denied based on FPD’s written and oral representations that

it plead[ed] nothing more than a claim for damages based on its compliance and Corval’s

breach of the contract as written.” The district court’s construction of its rule-12 ruling is

consistent with its earlier explanation of the rule-12 issues and its analysis of those issues.

See Tarlan v. Sorensen, 702 N.W.2d 915, 919 (Minn. App. 2005) (“[A] district court’s

construction of its own ruling is given great weight on appeal”). Because the district

court previously ruled that FPD’s pleading adequately set forth a breach-of-contract

claim based solely on the contract as written and because FPD did not obtain leave to

amend its pleading to include the equitable-estoppel, waiver, and contract-modification

theories that it relies on in defense of summary judgment, the district court did not err by

refusing to consider those theories. See Golla, 493 N.W.2d at 605.

       Nor did the district court err by refusing to grant, sua sponte, leave to amend in

response to FPD’s suggestion, at the summary-judgment hearing, that amendment would

be proper if necessary to clarify its pleading. “A party may amend a pleading by leave of

court, and amendments should be freely granted, except where to do so would result in

                                              9
prejudice to the other party. The trial court has wide discretion to grant or deny an

amendment, and its action will not be reversed absent a clear abuse of discretion.” Fabio,
504 N.W.2d at 761 (citations omitted). “The liberality to be shown in the allowance of

amendments depends in part upon the stage of the action and in a great measure upon the

facts and circumstances of the particular case.” Dale v. Pushor, 246 Minn. 254, 262, 75
N.W.2d 595, 601 (1956).

       Although FPD did not move for leave to amend, the district court indicated that it

would not allow amendment, noting that at “this late stage” discovery had ended, “all

deadlines in the scheduling order [had] passed and the case [was] supposed to be trial

ready.” The district court noted that after the discussion at the rule-12 hearing, in which

the district court agreed with Corval that FPD’s complaint did not set forth a common-

course-of-dealing theory, and the court’s order denying Corval’s rule-12 motion, “FPD

was on notice that both [Corval] and the court treated the counterclaim as a cause of

action on the contract as written. Moreover, FPD was on notice that Corval considered

the pleading deficient as to any claim for course of conduct estoppel.” The district court

observed that “FPD had plenty of time to file a motion to amend” and that it was

“surprising that FPD never sought to amend its counterclaim.” But the district court

reasoned that at the time of the summary-judgment hearing, “Corval would be

substantially prejudiced by way of time and expense if an amendment is permitted,”

because permitting an amendment would require reopening discovery, warrant another

Corval dispositive motion, and delay trial.

                                              10
       The district court’s reliance on the late stage of the proceeding and the resulting

prejudice to Corval was proper under caselaw. See Cybyske v. Indep. Sch. Dist. No. 196,

Rosemount-Apple Valley, 347 N.W.2d 256, 264 (Minn. 1984) (affirming district court’s

denial of a motion to amend because “[p]laintiff delayed over a year after the filing of her

complaint, until the eve of defendants’ summary judgment motion, to make her motion to

amend”). Given the late stage and the potential prejudice, the district court did not

clearly abuse its discretion in refusing to grant, sua sponte, FPD leave to amend its

pleading.2

       In sum, the district court properly limited its consideration of Corval’s motion for

summary judgment to the issue of whether FPD complied with the subcontract as written.

On that point, there is no genuine issue of material fact. FPD acknowledges that the

“undisputed evidence” establishes that it routinely submitted change-order requests “that

did not strictly comply with or follow the procedures set forth in the parties’ written

subcontract.”   Because it is undisputed that FPD did not follow the change-order

procedures in the subcontract as written, which was necessary to obtain additional

compensation, the district court did not err by summarily dismissing FPD’s counterclaim

and granting Corval summary judgment on its declaratory-judgment action.

2
  The district court also reasoned that amendment would be futile, addressing the merits
of FPD’s equitable-estoppel, waiver, and contract-modification theories. We do not
reach this ruling because it is unnecessary to our analysis.

                                            11
                                             II.

       We next consider FPD’s argument that the district court erred by refusing to

consider the sworn statement of a former Corval employee when ruling on summary

judgment.

       In its order granting summary judgment, the district court explained that the

parties agreed to depose a former Corval employee, W.K., and stipulated to “the entry of

a court order permitting issuance of a Colorado subpoena compelling [W.K.]’s

attendance at a deposition.” FPD’s counsel obtained the subpoena, which was served on

W.K. Because W.K. was not available on the deposition date noticed in the subpoena,

FPD’s counsel and W.K. agreed to an alternative date. After Corval’s counsel declined

that date due to short notice, FPD’s counsel did not arrange a new date with opposing

counsel. Instead, counsel asked W.K. if he would provide a “sworn statement” on the

deposition date. W.K. agreed and provided sworn testimony before a court reporter. The

district court concluded that, “[u]nder the circumstances, it is unlikely that [W.K.]

understood the difference between a court-ordered deposition by subpoena and a

voluntary sworn statement following service of a subpoena.” The district court further

concluded that counsel for FPD “abused the court’s process by improperly leading the

witness to believe that his attendance was court compelled.” As a sanction, the district

court ruled that “[W.K.’s] deposition is stricken from the record of this case.”

       “[C]ourts are vested with considerable inherent judicial authority necessary to

their vital function—the disposition of individual cases to deliver remedies for wrongs

and justice freely and without purchase; completely and without denial; promptly and

                                             12
without delay, conformable to the laws. The task of determining what, if any, sanction is

to be imposed is implicated by the broad authority provided the trial court.” Patton v.

Newmar Corp., 538 N.W.2d 116, 118-19 (Minn. 1995) (citations and quotations omitted).

“This court reviews an award of sanctions under an abuse-of-discretion standard.”

Frazier v. Burlington N. Santa Fe Corp., 788 N.W.2d 770, 782 (Minn. App. 2010), rev’d

on other grounds, 811 N.W.2d 618 (Minn. 2012).

       In its order imposing the sanction, the district court stated the following:

              The reprehensible manner in which the deposition was
              scheduled is further amplified by the secretive manner in
              which the subpoena and deposition notice were served, the
              way Corval’s counsel was falsely led to believe that a
              deposition was still being arranged after it was already
              completed, and the fact that a completed deposition was
              covered up until after the discovery and dispositive motion
              filing deadlines passed.

       FPD takes issue with the district court’s treatment of W.K.’s statement as a

“deposition,” arguing that it was “little different than a sworn affidavit.” Regardless of

the district court’s word choice, the district court based its ruling on FPD’s secretive and

deceptive conduct and the resulting abuse of the subpoena process.                Under the

circumstances, the district court acted well within its discretion by striking W.K.’s

testimony from the record.

                                             III.

       Lastly, we consider FPD’s argument that the district court abused its discretion in

awarding costs to Corval. “An award of costs and disbursements has generally been

allowed within the sound discretion of the trial judge. As such, [appellate courts] review

                                             13
for an abuse of that discretion.” Kellar v. Von Holtum, 605 N.W.2d 696, 703 (Minn.

2000) (citation omitted).

        FPD argues that “the district court improperly awarded Corval $57,378.00 for

premiums it paid to secure a bond that discharged FPD’s mechanic’s lien . . . . This was

not a necessary cost of the litigation and, therefore, is unreasonable.” But the subcontract

specifically provides:

                     Should there be any . . . lien asserted before or after
              final payment is made that arises from [FPD’s] Services,
              [FPD] shall reimburse [Corval] for any costs and expenses,
              including attorneys’ fees, costs and expenses, incurred by
              [Corval] in satisfying, discharging or defending against any
              such . . . lien . . . provided [Corval] is making payments or
              has made payments to [FPD] in accordance with the terms of
              this Agreement.

        Because the district court ruled that Corval did not owe FPD any additional

payments under the subcontract, Corval had “made payments to [FPD] in accordance

with the terms of [the] Agreement.” Thus, under the plain language of the subcontract,

Corval was entitled to reimbursement for the cost of the bond necessary to discharge the

lien.

        Affirmed.

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