Court Opinion

ID: 4511055
Source: CourtListenerOpinion
Date Created: 2020-02-27 19:06:25.26544+00
Date Added: 2024-06-11T12:14:03.685807
License: Public Domain

Filed 2/27/20 by Clerk of Supreme Court

                  IN THE SUPREME COURT
                  STATE OF NORTH DAKOTA

                                 2020 ND 47

Northwest Grading, Inc.,                           Plaintiff, Appellant and
                                                             Cross-Appellee
      v.
North Star Water, LLC,                            Defendant, Appellee and
                                                         Cross-Appellant
      and
The Estate of John W. Lindvig, Thomas H.
Lindvig, Donald E. Lindvig, The Fred and Clara
Eckert Foundation for Children, Barbara
Lindvig, and Wesley Lindvig, G. John Schmitz,
Jacob Schmitz, Casey Schmitz, Jordan Schmitz,
Codi Austreim, Duane Sand, individually, and
Nathan Bachman, individually,                                  Defendants
      and
William Krick,                            Third-Party Defendant, Appellant
                                                       and Cross-Appellee

                                No. 20190128

Appeal from the District Court of McKenzie County, Northwest Judicial
District, the Honorable Robin A. Schmidt, Judge.

AFFIRMED AS MODIFIED.

Opinion of the Court by Tufte, Justice.

Lee M. Grossman, Fargo, North Dakota, for appellants.
Kevin J. Chapman (argued) and Kari L. Jensen (on brief), Williston, North
Dakota, for defendant, appellee, and cross-appellant.

                                   2
           Northwest Grading, Inc. v. North Star Water, LLC
                           No. 20190128

Tufte, Justice.

[¶1] Northwest Grading, Inc., appeals from a district court judgment entered
after a July 2018 bench trial. North Star Water, LLC, cross-appeals. We
conclude the district court did not err as to either party’s damages and did not
abuse its discretion by denying Northwest Grading’s motion to strike
testimony. We modify the judgment to correct the calculation of interest, and
affirm the judgment as modified.

                                       I

[¶2] North Star Water, LLC, provides water to oil drilling companies. In
September 2014, North Star hired Northwest Grading, Inc., to construct an
underground water pipeline from the Missouri River to North Star’s various
pumping stations. Northwest Grading sent regular invoices to North Star
during the course of construction.

[¶3] In August 2015, Northwest Grading informed North Star it owed a
balance of $91,072.99. Northwest Grading notified North Star it would
repossess the pipeline if it were not paid immediately. Northwest Grading did
not receive payment. Employees of Northwest Grading made the pipeline
inoperable by closing valves and filling the valve boxes with dirt and concrete.
As a result, North Star was temporarily unable to sell water to at least one of
its customers.

[¶4] Northwest Grading sued North Star for breach of contract, quantum
meruit, and foreclosure of a construction lien. North Star counterclaimed for
fictitious billing, trespass, and damage to property through unlawful
repossession.

[¶5] A three-day bench trial was held in July 2018. At trial, the president of
Northwest Grading, William Krick, testified he gave a “terms and conditions
sheet” to a representative of North Star and asked that he sign and return it.

                                       1
The document contained provisions for interest and repossession upon default.
It also provided Northwest Grading owned the pipeline until paid in full. Krick
testified he never received a signed document from North Star, but
nevertheless Northwest Grading began work on the pipeline based on email
communications between the parties.

[¶6] Beginning on the first day of trial, Kevin Koach, the general manager of
North Star, testified about North Star’s lost water sales, including volume of
water pumped per minute, the price per barrel, and the amount of time the
pipeline was out of service. Koach also testified about damages incurred
clearing concrete and dirt out of the pipeline’s valve boxes. While cross-
examining Koach on the second day of trial, Northwest Grading moved to
strike all Koach’s testimony to that point regarding lost water sales because
his testimony referred to a water contract that was not disclosed in discovery.
The district court denied Northwest Grading’s motion. North Star’s damages
were summarized on a spreadsheet, which North Star offered into evidence.
Northwest Grading objected to the spreadsheet’s admission for lack of
foundation, and the court overruled the objection.

[¶7] The district court entered findings of fact, conclusions of law, and an
order for judgment in October 2018. The court found a business relationship
existed between Northwest Grading and North Star, but not based on a written
contract. The court concluded Northwest Grading was not authorized to
repossess the pipeline by pouring concrete in the valve boxes, and its doing so
was a breach of the peace.

[¶8] The district court awarded Northwest Grading $91,072.99 in damages.
The court also awarded North Star $39,328.29 in damages. The court awarded
prejudgment interest to both parties. It awarded $9,654.11 in interest to
Northwest Grading based on its net damages of $51,744.70. It awarded North
Star $7,337.57 in interest based off its gross damages of $39,328.29.

[¶9] In December 2018, Northwest Grading moved to amend the findings of
fact and judgment. Northwest Grading sought to strike Kevin Koach’s

                                      2
testimony about North Star’s lost water sales damages as a sanction under
N.D.R.Civ.P. 37. A hearing was held in February 2019, and the district court
denied the motion in March 2019. Northwest Grading now appeals and North
Star cross-appeals.

                                       II

[¶10] Northwest Grading argues the district court abused its discretion by
denying its motion to strike testimony regarding documents not disclosed in
discovery.

[¶11] A trial court has broad discretion in deciding whether to admit or exclude
evidence. State v. Muhammad, 2019 ND 159, ¶ 6, 931 N.W.2d 181 (citing State
v. Wangstad, 2018 ND 217, ¶ 6, 917 N.W.2d 515). A trial court’s decision to
admit or exclude evidence will be reversed on appeal only for an abuse of
discretion. Id. A court abuses its discretion when it acts in an arbitrary,
unreasonable, or unconscionable matter, it misinterprets or misapplies the
law, or its decision is not the product of a rational mental process leading to a
reasoned determination. Brock v. Price, 2019 ND 240, ¶ 12, 934 N.W.2d 5
(citing N.D. Private Investigative and Sec. Bd. v. TigerSwan, LLC, 2019 ND
219, ¶ 13, 932 N.W.2d 756).

[¶12] Northwest Grading moved to strike all evidence regarding documents
not disclosed in discovery, including Koach’s testimony about damages due to
lost water sales. It argues N.D.R.Civ.P. 37(b)(2)(A) requires the exclusion of
evidence not disclosed in discovery to ensure compliance with the discovery
rules of N.D.R.Civ.P. 26. Northwest Grading’s argument that N.D.R.Civ.P.
37(b)(2)(A) requires a mandatory sanction is not contemplated by the text of
the rule, which provides:

            If a party or a party’s officer, director, or managing agent—
      or a witness designated under Rule 30(b)(6) or 31(a)—fails to obey
      an order to provide or permit discovery, including an order under
      Rule 26(f), 35, or 37(a), the court where the action is pending may
      issue further just orders. They may include the following:

                                       3
            (i) directing that the matters embraced in the order or other
      designated facts be taken as established for purposes of the action,
      as the prevailing party claims;
            (ii) prohibiting the disobedient party from supporting or
      opposing designated claims or defenses, or from introducing
      designated matters in evidence;
            (iii) striking pleadings in whole or in part;
            (iv) staying further proceedings until the order is obeyed;
            (v) dismissing the action or proceeding in whole or in part;
            (vi) rendering a default judgment against the disobedient
      party; or
            (vii) treating as contempt of court the failure to obey any
      order except an order to submit to a physical or mental
      examination.

[¶13] Northwest Grading cites Fed.R.Civ.P. 37(c)(1) as persuasive authority.
Rule 37(c)(1), Fed.R.Civ.P., provides, “If a party fails to provide information or
identify a witness as required by Rule 26(a) or (e), the party is not allowed to
use that information or witness to supply evidence on a motion, at a hearing,
or at a trial, unless the failure was substantially justified or is harmless.”
North Dakota’s Rule 37 does not include this provision.

[¶14] North Dakota’s corollary rule is N.D.R.Civ.P. 37(b)(2)(A)(ii), which
permits a district court to sanction a party in violation of a discovery order by
prohibiting the disobedient party from supporting or opposing a claim or
defense with evidence not disclosed under the discovery order. The key
difference between N.D.R.Civ.P. 37(b)(2)(A)(ii) and Fed.R.Civ.P. 37(c)(1) is that
the North Dakota rule offers exclusion as a sanction for disobedience of a
discovery order while the federal rule sweeps more broadly to require the
district court to exclude testimony regarding any undisclosed information.

[¶15] There were discovery orders in this case. However, there was not an
order to compel production of the water sale contract at issue in Northwest
Grading’s motion to strike. Because North Star was not ordered to produce the
water sale contract, its failure to disclose did not violate a court order. Because
North Star did not violate a discovery order, N.D.R.Civ.P. 37(b)(2)(A)(ii) does

                                        4
not apply. The district court did not misapply the law in rejecting the argument
that it was required to exclude Koach’s testimony. The court did not abuse its
discretion in denying Northwest Grading’s motion to strike testimony because
no timely objection was made to Koach’s testimony when the testimony was
offered.

                                        III

[¶16] Northwest Grading argues the district court’s finding that no written
contract existed between the parties was clearly erroneous.

[¶17] “Whether a contract exists is a question of fact for the trier of fact.” Jones
v. Pringle & Herigstad, P.C., 546 N.W.2d 837, 842 (N.D. 1996). The trier of fact
determines whether a contract is intended to be a complete, final, and binding
agreement. Id. (citing Jerry Harmon Motors, Inc. v. First Nat’l Bank & Trust
Co., 472 N.W.2d 748, 752 (N.D. 1991)). This Court reviews a district court’s
findings regarding the existence of a contract under the clearly erroneous
standard. Id. (citing Hirschkorn v. Severson, 319 N.W.2d 475, 478 (N.D. 1982)).
A finding of fact is clearly erroneous “if it is induced by an erroneous view of
the law, if no evidence exists to support it, or if, on the entire record, we are
left with a definite and firm conviction a mistake has been made.” Lonesome
Dove Petroleum, Inc. v. Nelson, 2000 ND 104, ¶ 15, 611 N.W.2d 154.

[¶18] The district court’s finding that the parties were not bound by a written
contract is supported by the evidence. Krick testified that he gave a North Star
representative a “terms and conditions sheet” and asked that he sign and
return it. However, Krick also testified that despite asking several times,
North Star never signed or returned the document. Rather, North Star
requested via email that Northwest Grading begin work on the pipeline, and
Northwest Grading began construction. The district court’s finding is not
induced by an erroneous view of the law and is supported by the evidence, and
we are not left with a definite and firm conviction a mistake has been made.
We conclude the district court’s finding that the parties were not bound by a
written agreement is not clearly erroneous.

                                         5
                                      IV

[¶19] Northwest Grading argues the district court erred by awarding damages
to North Star based on Northwest Grading’s damage to the pipeline. Northwest
Grading argues its employees’ acts of pouring dirt and concrete in the pipeline
valve boxes was a lawful repossession authorized by contract or by the Uniform
Commercial Code (UCC).

[¶20] As discussed above, the district court’s finding that there was no written
contract was not clearly erroneous. Because there was no written contract, the
contractual provision in the terms and conditions sheet that Northwest
Grading relies upon did not authorize the repossession.

[¶21] Northwest Grading also argues it was authorized to repossess the
pipeline as a secured creditor under the UCC. There was no showing at trial
that Northwest Grading was a secured creditor under the UCC. On this record,
we conclude the district court did not err in awarding damages to North Star
based on Northwest Grading’s damage to the pipeline.

                                       V

[¶22] Northwest Grading argues the district court abused its discretion in its
calculation of interest because it awarded Northwest Grading prejudgment
interest based on Northwest Grading’s net damages while it awarded North
Star prejudgment interest based on North Star’s gross damages. We review a
district court’s award of interest for an abuse of discretion. Fredericks v.
Fredericks, 2016 ND 234, ¶ 36, 888 N.W.2d 177.

[¶23] The district court found North Star liable to Northwest Grading for
damages in the amount of $91,072.99. The court also found Northwest Grading
liable to North Star for damages in the amount of $39,328.29. The district court
awarded $9,654.11 in interest to Northwest Grading based on Northwest
Grading’s net award of $51,744.70. The court also awarded $7,337.57 in
interest to North Star based on North Star’s gross award of $39,328.29. The
district court did not explain its reasoning for the interest calculations.

                                       6
[¶24] Where there are offsetting damages awards between two parties, the
proper method of calculating prejudgment interest is to first determine the net
award and then determine interest on that net amount. Here, that would be
an award to Northwest Grading of $9,654.11. The same amount may be
determined by separately calculating interest to each party on the gross
amount and then subtracting. Interest on the $91,072.99 award to Northwest
Grading is $16,991.69. Interest on the $39,328.29 award to North Star is, as
the district court calculated, $7,337.56. The difference between these amounts,
the net calculated by the district court, is $9,654.11. Mathematically, the
interest on the net award is the same amount as the difference between the
interest amounts on the gross awards. By calculating the interest on the net
award to Northwest Grading and then offsetting the interest on the gross
award to North Star, the district court erroneously double-counted the interest
on the judgment to North Star by subtracting $7,337.53 twice. We conclude it
was arbitrary and unreasonable for the district court to calculate interest in
this way. Therefore, the district court abused its discretion as to the award of
interest.

[¶25] Under N.D.R.App.P. 35(a)(1), we may modify the judgment as to any
party. We modify the judgment to correct Northwest Grading’s award of
prejudgment interest. The district court ordered judgment in the “amount of
$54,061.24 ($51,744.70 + 9,654.11 - $7,337.57) . . . to Northwest Grading.” We
modify paragraph 16 of the district court’s order and paragraph 3 of the
judgment to remove the duplicate deduction of $7,337.57 and award Northwest
Grading a money judgment in the amount of $61,398.81.

                                      VI

[¶26] North Star cross-appeals, arguing the district court erred in awarding
any damages to Northwest Grading because it found no written contract
existed.

[¶27] The district court found that while there was no written contract
between the parties, it was clear from the parties’ conduct that they had a

                                       7
“business relationship.” The court found that Northwest Grading regularly
sent invoices to North Star for work performed and North Star sent payment.
The absence of a written contract does not bar Northwest Grading from
recovering for the unpaid invoices. See N.D.C.C. § 9-06-02 (“All contracts may
be oral except such as are specially required by statute to be in writing.”) The
district court’s award of damages to Northwest Grading is consistent with the
finding of a business relationship. We conclude the district court did not err in
awarding damages to Northwest Grading.

                                      VII

[¶28] We modify paragraph 16 of the district court’s order and paragraph 3 of
the judgment under N.D.R.App.P. 35(a)(1) to remove the duplicate deduction
of $7,337.57 and award Northwest Grading a money judgment in the amount
of $61,398.81. The judgment is affirmed as modified.

[¶29] Jerod E. Tufte
      Gerald W. VandeWalle, C.J.
      Daniel J. Crothers
      Dale V. Sandstrom, S.J.
      Jon J. Jensen

[¶30] The Honorable Dale V. Sandstrom, Surrogate Judge, sitting in place of
McEvers, J., disqualified.

                                       8