Opinion
No. A06-2227.
Filed December 4, 2007.
Appeal from the District Court, Hennepin County, File No. 27-CV-05-007744.
Richard T. Ostlund, Anthony Ostlund Baer, P.A. and Janel M. Dressen, Valspar Law Department, (for respondent).
Michael Leight (pro hac vice), Law Offices of Michael Leight and Jack D. Elmquist, Jack D. Elmquist Law Offices, (for appellant).
Considered and decided by Ross, Presiding Judge; Kalitowski, Judge; and Worke, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2006).
UNPUBLISHED OPINION
Appellant Gaylord's, Inc. challenges the district court's grant of summary judgment for respondent Valspar Refinish, Inc. on its breach-of-contract claim and against appellant on all of its counterclaims. Appellant also contends that the district court erred by failing to rule on or sustain its evidentiary objections to affidavits submitted by respondent in support of its claim. We affirm.
DECISION
When reviewing summary-judgment determinations, this court considers "(1) whether there are any genuine issues of material fact and (2) whether the [district court erred in [its] application of the law." State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). A court reviewing a grant of summary judgment on appeal must view the record in the light most favorable to the party against whom judgment was granted. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993). Granting a summary-judgment motion is appropriate when all the pleadings, depositions, answers to interrogatories, admissions, and affidavits on file "show that there is no genuine issue of material fact and that neither party is entitled to a judgment as a matter of law." Id.; see Minn. R. Civ. P. 56.03. But a "party resisting summary judgment must do more than rest on mere averments." DLH, Inc. v. Russ, 566 N.W.2d 60, 69-71 (Minn. 1997). If the record, taken as a whole, could not lead a rational trier of fact to find for the nonmoving party, then evidence creating a "metaphysical doubt as to a factual issue" is not enough, and no genuine issue exists for trial. Id.
Here, respondent Valspar and appellant Gaylord entered into a written supply agreement whereby appellant agreed to purchase automotive paint coating exclusively from respondent for a minimum of five years in exchange for its receipt of a $400,000 prepaid rebate from respondent. Based on appellant's admissions and the unambiguous terms of the supply agreement, the district court granted summary judgment for respondent on its breach-of-contract claim and against appellant on its multiple counterclaims.
I.
Appellant argues that the district court's grant of summary judgment in favor of respondent on appellant's breach-of-contract claim was improper because a genuine issue of material fact exists as to whether it validly rejected or revoked its acceptance of respondent's products. Further, appellant contends that the district court erroneously construed the supply agreement's notice provision as requiring written notice. We disagree.
1. The Supply Agreement
Because construction and ambiguity of a contract are questions of law, this court reviews the instrument at issue between the parties — the supply agreement — de novo. Wolfson v. City of St. Paul, 535 N.W.2d 384, 386 (Minn.App. 1995), review denied (Minn. Sept. 28, 1995). When a written contract is clear and unambiguous, the parties' intent will be determined by the plain language of the contract, and the court may not modify, rewrite, or limit its effect by a strained construction, or speculate as to the parties' unexpressed intent. Travertine Corp. v. Lexington-Silverwood, 683 N.W.2d 267, 271 (Minn. 2004); Metro. Sports Facilities Comm'n v. Gen. Mills, Inc., 470 N.W.2d 118, 123 (Minn. 1991).
Here, the written notice requirement set forth in the parties' supply agreement is unambiguous on its face. Accordingly, the district court did not err in finding that appellant was required to give respondent written notice "setting forth in reasonable detail the cause of default" and granting a reasonable cure period.
2. Appellant's Alleged Rejection and Revocation
To be effective under Minnesota law, a buyer's rejection of goods must be within a reasonable period of time after their delivery, and the buyer must "seasonabl[y] notify the seller." Minn. Stat. § 336.2-602 (2002). Although rejection is no longer an option once goods have been accepted, a buyer may instead seek to revoke its acceptance of nonconforming goods. Minn. Stat. § 336.2-608(1) (2002). For a buyer's revocation to be valid, it must be both unequivocal and timely. But a seller's attempts to remedy defects may toll this time period. Minn. Stat. § 336.2-608(2) (2002); Fed. Motor Truck Sales Corp. v. Shanus, 190 Minn. 5, 11-12, 250 N.W. 713, 715-16 (1933).
What constitutes reasonable notice of a party's intent to reject or revoke may be set out in the parties' contract or left to the jury's determination. See DeWitt v. Itasca-mantrap Co-op Elec. Ass'n, 215 Minn. 551, 559-60, 10 N.W.2d 715, 719 (1943) (holding that no fact question existed where the contract language was "definite"). In clear cases where the contract at issue uses unambiguous language to set forth its notice requirements, the court may determine that the notice given was unreasonable as a matter of law. Id.
The district court properly determined that appellant's rejection and revocation arguments are deficient as a matter of law due to the oral, untimely and equivocal manner in which appellant communicated its notice. And a jury determination of whether appellant's notice was reasonable is unnecessary because the terms of the supply agreement unequivocally set forth the time period and manner in which appellant could justifiably reject or revoke the tendered goods. See DeWitt, 215 Minn. at 560, 10 N.W.2d at 719. Appellant's own admissions demonstrate that it failed to give respondent notice of its intent to reject or revoke the products within a reasonable time and in written form as required by the terms of the supply agreement.
Appellant argues that it gave respondent oral notice of the products' defaults and that Minnesota law does not require written notice where actual notice exists. Appellant's legal assertion is incorrect in the context of commercial contracts. Minn. Stat. § 336.2-209 (2002); DeWitt, 215 Minn. at 558-60, 10 N.W.2d at 718-19. Further, while a seller's attempts to remedy product defects may toll the "reasonable time" period available to revoke acceptance of nonconforming goods, the record here does not reveal anything aside from mere deposition assertions in support of appellant's contention that it gave respondent timely, oral notice of its revocation. Minn. Stat. § 336.2-608(2). But even assuming for purposes of summary judgment review that respondent did have actual notice of the products' defects, we conclude that appellant's undisputed continued use and repeated ordering of Valspar products for more than one year after discovery of their defects defeats buyer's revocation remedy, and demonstrates that appellant's revocation was not unequivocal in nature as required by Minnesota law.
Because appellant presented no evidence beyond assertions of its alleged rejection and revocation of respondent's products, and because the court correctly construed the parties' unambiguous supply agreement as requiring written notice, we conclude that the district court properly granted summary judgment against appellant on its breach of contract claim.
II.
Appellant asserts that the district court erred in granting summary judgment for respondent on appellant's breach of implied warranty of fitness for a particular purpose and breach of express warranty claims. We disagree.
1. Breach of Implied Warranty
Under Minnesota law, exclusion of all implied warranties by contract is permitted, so long as the disclaimer is in writing and conspicuous. Minn. Stat. § 336.2-316(2) (2002).
We assume for purposes of summary-judgment review that the products were defective. But regardless of the products' defects, the parties' supply agreement expressly and conspicuously disclaims the implied warranties of merchantability and fitness for a particular purpose in accordance with the statutory requirements of Minn. Stat. § 336.2-316. Accordingly, the district court was correct to grant summary judgment on appellant's implied-warranty claim and to conclude that appellant's breach-of-warranty claims were limited to the general warranty provision set forth in the parties' supply agreement.
2. Breach of Express Warranty
To establish a breach-of-warranty claim under Minnesota law, appellant must show the existence of a warranty, a breach of that warranty agreement, and evidence of a causal connection between the breach and the damages suffered. Peterson v. Bendix Home Sys., Inc. 318 N.W.2d 50, 52-53 (Minn. 1982). In addition, giving the seller notice of the goods' nonconformity within a reasonable time after discovery is a necessary condition precedent to a claimant's assertion of a breach-of-warranty claim. Minn. Stat. § 336.2-607 (2002). Minnesota courts have recognized three purposes behind the notice requirement set forth in Minn. Stat. § 336.2-607:
(1) to provide the seller with an opportunity to correct the defect (a particularly compelling purpose where, as here, the sales contract limits the buyer's remedy to repair or replacement);
(2) to provide the seller with an opportunity to prepare for negotiation and litigation; and
(3) to provide the seller with an opportunity to investigate the claims independently while the merchandise remains in a relatively pristine state.
Church of the Nativity of Our Lord v. WatPro, Inc., 491 N.W.2d 1, 5 (Minn. 1992). Here, appellant failed to give respondent timely, appropriate written notice of the products' alleged nonconformity in accordance with the express terms of the supply agreement. Appellant's admissions show that it did not give respondent any notice of its intent to assert a warranty claim, and thereby failed to meet the legal prerequisite of Minn. Stat. § 336.2-607 for asserting a breach-of-warranty claim.
Appellant's contention that respondent had knowledge of the product defects misses the mark because no evidence of what respondent actually knew can change the fact that appellant failed to provide notice to respondent of appellant's intent to assert its rights under the warranty. While general knowledge of problems with a product may fulfill the last two purposes of Minnesota's notice requirement, the first purpose of the notice requirement — providing the seller with an opportunity to correct or cure the product defect — can only be fulfilled if the notice given is more than a mere complaint and actually conveys the buyer's intent to claim a breach of some warranty and seek damages for that breach. Truesdale v. Friedman, 270 Minn. 109, 122-23, 132 N.W.2d 854, 863 (1965). Because appellant failed to give respondent notice and an opportunity to cure in accordance with the terms of the parties' supply agreement, its breach-of-warranty claim fails as a matter of law.
3. Equitable Estoppel
In order to avail oneself of the doctrine of equitable estoppel, a party must prove that: (1) promises or inducements were made; (2) it reasonably relied on the promises; and (3) it will be harmed if estoppel is not applied. Hydra-Mac, Inc. v. Onan Corp., 450 N.W.2d 913, 919 (Minn. 1990). Further, Minnesota law allows parties to a contract to limit the statute-of-limitations period to assert claims under the U.C.C., so long as the limitation is not reduced to less than one year. Minn. Stat. § 336.2-725 (2002). But "[a]n exclusive remedy fails of its essential purpose if circumstances arise to deprive the limiting clause of its meaning or one party of the substantial value of its bargain." Durfee v. Rod Baxter Imps., Inc., 262 N.W.2d 349, 356 (Minn. 1977).
Appellant alleges that respondent made oral promises to fix the products' defects. But appellant's reliance on oral promises was not reasonable in light of the contradictory, unambiguous provisions set forth in the parties' supply agreement and the six-month testing period prior to entering into the supply agreement during which appellant had ample opportunity to spray-test, special order, and experiment with respondent's products.
Moreover, the limitation-of-remedies clause does not fail its essential purpose because the record indicates that appellant received substantial financial benefits as a result of its supply agreement with respondent. Because appellant failed to present evidence of reasonable reliance, and because the limitation-of-remedies clause does not deny appellant the substantial value of its bargain, we conclude that the district court did not err by allowing respondent to invoke the supply agreement's limitation-of-remedies clause.
4. Delivery of the General Warranty
Under Minnesota law, a dispute as to when the disclaimer of warranties was delivered will preclude summary judgment, and "the burden is upon the party asserting the disclaimer to establish that the disclaimer was delivered at the time of sale and constituted an integral part of the transaction." Noel Transfer Package Delivery Serv., Inc. v. Gen. Motors, 341 F. Supp. 968, 970 (D. Minn. 1972) (citation omitted). Here, the deposition testimony of appellant's president establishes delivery. Although appellant cites a subsequent affidavit by its president claiming nondelivery, this statement directly contradicts the president's earlier deposition testimony admitting that he signed and read the entire supply agreement, including its general warranty provision. As this court stated in Banbury v. Omnitrition Int'l, Inc., "[a] self-serving affidavit that contradicts earlier damaging deposition testimony is not sufficient to create a genuine issue of material fact." 533 N.W.2d 876, 881 (Minn.App. 1995). Accordingly, the self-serving affidavit of appellant's president does not create a material fact issue sufficient to preclude the court's grant of summary judgment.
5. Failure to Meet Published Specifications
"A material fact," precluding issuance of summary judgment, "is one of such a nature as will affect the result or outcome of the case depending on its resolution." Zappa v. Fahey, 310 Minn. 555, 556, 245 N.W.2d 258, 259-60 (1976). Because we have concluded that appellant failed to give respondent the requisite notice and an opportunity to cure, any factual disputes regarding the products' alleged defects are not material or relevant. Thus, the district court's dismissal of appellant's claim regarding the published specifications was not in error.
6. Tolling of Breach-of-Warranty Claim
The time during which a seller tries to remedy or cure defects in its products is not considered in determining whether a buyer's actions were timely. But such tolling of the limitations period in an agreement occurs only "upon notice of the breach" having been given to the seller. Fed. Motor Truck Sales Corp., 190 Minn. at 11, 250 N.W. at 715. Here, the supply agreement expressly required appellant to assert claims under the general warranty within a period of six months of discovering the products' nonconformity, and in no event later than 12 months after receipt of the products. But appellant's admissions show that it did not give respondent timely, written notice of its intent to assert a breach-of-warranty claim. Because appellant failed to assert its breach-of-warranty claim against respondent within the limited time period expressly set forth in the parties' supply agreement, and because respondent's behavior did not justify appellant's reasonable reliance such that a tolling of the limitations period would be proper, the district court did not err in determining that appellant's breach-of-warranty claim was untimely as a matter of law.
III.
Appellant contends that the district court erred in holding that its fraudulent-inducement and negligent-misrepresentation tort claims failed as a matter of law. We disagree.
To succeed on its fraud claim, appellant was required to show that: (1) there was a representation by respondent; (2) the representation had to do with a past or existing fact; (3) the factual representation was false; (4) the factual representation was material; (5) the factual representation was "susceptible of knowledge"; (6) respondent knew its representation to be false, or in the alternative, that appellant was without knowledge of whether respondent's representation was true or false; (7) respondent intended to have appellant induced to act, or that appellant was justified in acting upon the factual representation; (8) appellant was so induced to act, or so justified in acting, upon respondent's representation; (9) appellant took actions in reliance upon the representation; (10) appellant suffered damages; and (11) respondent's statement was the proximate cause of the damages suffered by appellant. Davis v. Re-Trac Mfg. Corp., 276 Minn. 116, 117, 149 N.W.2d 37, 38-39 (1967); Lampert Lumber Co. v. Ram Constr., 413 N.W.2d 878, 881 (Minn.App. 1987). Because a subjective standard is used to measure the reasonableness of a plaintiff's reliance for purposes of establishing a fraud claim, courts are less likely to find that a claimant has established this justifiable-reliance element when the parties involved are sophisticated equals engaged in a commercial transaction. Lassen v. First Bank Eden Prairie, 514 N.W.2d 831, 839 (Minn.App. 1994), review denied (Minn. June 29, 1994).
Here, appellant cannot demonstrate its justifiable reliance on respondent's representations. The relationship between appellant and respondent was a commercial relationship between sophisticated equals, and appellant admitted that it entered into the supply agreement with respondent only after taking a period of six months to consider alternative paint suppliers and test respondent's products. Because the record shows that appellant had ample time and opportunity to investigate the information supplied by respondent and could have chosen to engage in additional due diligence, appellant cannot demonstrate that it justifiably relied on alleged information from or promises made by respondent that were in direct conflict with the supply agreement's unambiguous provisions. And because appellant cannot demonstrate its justifiable reliance on respondent's representations, its fraudulent-inducement claim fails as a matter of law.
The tort of negligent misrepresentation is defined as:
One who, in the course of his business, profession, or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.
Hebrink v. Farm Bureau Life Ins. Co., 664 N.W.2d 414, 420 (Minn.App. 2003) (quoting Restatement (Second) of Torts § 552(1) (1977)). But this court has recognized that in commercial relationships involving sophisticated parties, negotiating at arm's length, where neither party is "supplying information for the guidance of the other," contracting parties owe each other no duty beyond honesty, and an aggrieved party is "limited to suit in contract or in fraud." Safeco Ins. Co. of Am. v. Dain Bosworth Inc., 531 N.W.2d 867, 873 (Minn.App. 1995), review denied (Minn. July 20, 1995). Here, it is undisputed that the relationship between appellant and respondent was a commercial relationship between sophisticated equals. Further, because the record shows that appellant had ample time and opportunity to investigate the information supplied by respondent and could have chosen to engage in additional due diligence, appellant cannot demonstrate that it justifiably relied on any information or alleged promises made by respondent that were in direct conflict with the supply agreement's unambiguous provisions.
Accordingly, because appellant cannot demonstrate that respondent owed appellant a duty sufficient to support a claim of negligent misrepresentation, and because appellant failed to demonstrate its justifiable reliance on alleged representations made by respondent, the district court's grant of summary judgment on appellant's negligent-misrepresentation claim was proper.
Finally, because appellant failed to establish the requisite elements of its tort claims we need not address appellant's argument that the district court erred in its application of the economic-loss doctrine.
IV.
Appellant argues that the district court erred in granting summary judgment for respondent on respondent's breach-of-contract claim because there exist material factual disputes as to whether appellant rejected or revoked acceptance of respondent's products, whether written notice of the products' nonconformity was required, whether respondent waived its right to written notice of the products' nonconformity, and whether respondent can be equitably estopped from invoking the limitations period set forth in the parties' supply agreement. We disagree.
Appellant's admissions established that it (1) used a paint supplier other than respondent during the term of the parties' exclusive supply agreement; (2) stopped purchasing respondent's products without providing it with written notice regarding its delivery of defective goods; and (3) failed to cure within 60 days and subsequently retained the unearned portion of its prepaid rebate, despite being given written notice of its default by respondent. These admissions demonstrate that appellant has materially breached provisions 2, 3, and 6 of the parties' supply agreement, and constitute sufficient factual support for the court's grant of summary judgment.
Appellant argues that the court erred in granting summary judgment for the same reasons appellant contends respondent was not entitled to summary judgment on appellant's breach-of-contract and breach-of-warranty counterclaims. For the reasons set forth above in sections I and II, we conclude that appellant's rejection, revocation, written-notice, waiver, and equitable-estoppel arguments fail as a matter of law.
V.
Appellant argues that the district court committed reversible error by rejecting its objections to three affidavits filed by respondent in support of its summary-judgment motion because the affidavits were not based on personal knowledge and were unduly argumentative. We disagree.
Minnesota's rules of evidence require that affidavits "be made on personal knowledge, . . . set forth such facts as would be admissible in evidence, and . . . show affirmatively that the affiant is competent to testify to the matters stated therein." Minn. R. Civ. P. 56.05 (2003). But even when viewed in the light most favorable to appellant, a review of the declarations set forth in the three challenged affidavits demonstrates that they meet the evidentiary standards of Minn. R. Civ. P. 56.05. Further, the generalized evidentiary objections appellant filed with the court are unsupported by any evidence in the record disputing the information put forth in the affidavits.
Moreover, even if the district court did err in rejecting appellant's evidentiary objections, admission of these affidavits by the district court did not result in substantial unfairness to appellant and does not mandate reversal. This court will not grant a new trial based on a court's improper evidentiary ruling unless the complaining party is able to demonstrate prejudicial error. Kroning v. State Farm Auto. Ins. Co., 567 N.W.2d 42, 46 (Minn. 1997). Here, the record demonstrates that appellant's admissions and the unambiguous terms of the supply agreement constituted sufficient evidence to support the district court's grant of summary judgment on respondent's breach-of-contract claim, regardless of whether respondent's three affidavits were considered by the court.
We conclude that the district court did not err in rejecting appellant's evidentiary objections to respondent's affidavits.