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Textbook Cengage Advantage Books: Business Law: Text & Cases - Commercial Law for Accountants 13th Edition

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Page 1

780 N.W.2d 1

(Cite as: 780 N.W.2d 1)

Court of Appeals of Minnesota.

Chad DeROSIER, Respondent,

UTILITY SYSTEMS OF AMERICA, INC., Appellant.

No. A09–879.

March 2, 2010.

Background: Landowner brought action against excavator for cost of removing fill which excavator had dumped on

land in excess of permitted amount. The District Court, St. Louis County, Sally L. Tarnowski, J., awarded general

and consequential damages to landowner, and excavator appealed.

Affirmed as modified in part and reversed in part.

West Headnotes

[1] Damages 115 142

ly mentioned delay in his pre-litigation demand, where landowner did not plead special damages, landowner did not

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780 N.W.2d 1

(Cite as: 780 N.W.2d 1)

115k142 k. General or special damage. Most Cited Cases

Special damages require specific pleading but general damages do not. 48 M.S.A., Rules Civ.Proc., Rule 9.07.

“General damages,” as opposed to special damages, naturally and necessarily result from the act complained of.

[5] Damages 115 5

115 Damages

[6] Damages 115 23

115 Damages

115III Grounds and Subjects of Compensatory Damages

115III(A) Direct or Remote, Contingent, or Prospective Consequences or Losses

[7] Damages 115 140

115 Damages

115VII Amount Awarded

115VII(D) Breach of Contract

estimated the removal cost would exceed $20,000 when he first evaluated the situation.

[8] Damages 115 184

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780 N.W.2d 1

(Cite as: 780 N.W.2d 1)

115IX Evidence

115k183 Weight and Sufficiency

115k184 k. In general. Most Cited Cases

The plaintiff must establish a reasonable basis for approximating a loss.

[10] Contracts 95 320

95 Contracts

95V Performance or Breach

[11] Appeal and Error 30 893(1)

30 Appeal and Error

30XVI Review

30XVI(F) Trial De Novo

95 Contracts

95V Performance or Breach

95k320 k. Rights and liabilities on defective performance. Most Cited Cases

An implied right to cure exists in situations where cure is possible.

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780 N.W.2d 1

(Cite as: 780 N.W.2d 1)

95 Contracts

95V Performance or Breach

115 Damages

115III Grounds and Subjects of Compensatory Damages

115III(B) Aggravation, Mitigation, and Reduction of Loss

115k62 Duty of Person Injured to Prevent or Reduce Damage

115k62(4) k. Breach of contract. Most Cited Cases

115III Grounds and Subjects of Compensatory Damages

115III(B) Aggravation, Mitigation, and Reduction of Loss

115k62 Duty of Person Injured to Prevent or Reduce Damage

115k62(4) k. Breach of contract. Most Cited Cases

Landowner's rejection of excavator's offer to fix excess fill problem in exchange for payment was reasonable

115 Damages

115III Grounds and Subjects of Compensatory Damages

115III(B) Aggravation, Mitigation, and Reduction of Loss

115k62 Duty of Person Injured to Prevent or Reduce Damage

8 Accord and Satisfaction

8k23 k. Operation and effect of satisfaction. Most Cited Cases

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780 N.W.2d 1

(Cite as: 780 N.W.2d 1)

Accord and satisfaction acts to discharge a contract or a cause of action.

[18] Accord and Satisfaction 8 1

8 Accord and Satisfaction

8k1 k. Nature and requisites in general. Most Cited Cases

Robert H. Magie, III, Duluth, MN, for appellant.

Considered and decided by MINGE, Presiding Judge; SCHELLHAS, Judge; and STAUBER, Judge.

OPINION

America, Inc. (USA) was excavating at a nearby road construction project, DeRosier approached USA's foreman in

July 2004, explained his need for fill, and proposed that USA dump fill material on his property. The foreman

agreed on condition that DeRosier obtain the proper permits. USA did not charge DeRosier because the arrangement

allowed USA to avoid the cost of hauling and disposing of the excavated material at a more distant location. There

was no written contract.

DeRosier complained to USA that its mistake in dumping excess material delayed construction, explained that

he faced substantial removal costs, and demanded corrective action. USA denied liability, claiming that DeRosier

failed to (1) provide a copy of the city permit; (2) advise it of the limit on fill; or (3) perform city-required compac-

tion. A letter from DeRosier's counsel repeated the complaints and demanded that USA remove the extra fill under

threat of lawsuit. USA responded by again denying responsibility but offering to remove the excess fill for $9,500,

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780 N.W.2d 1

(Cite as: 780 N.W.2d 1)

contract to deposit 1,500 cubic yards of fill. It ordered USA to pay general damages of $22,829 FN1 and consequen-

specified in paragraph 20 of the district court's January 8, 2009 Findings of Fact, Conclusions of Law, Or-

der for Judgment, and Judgment.

ISSUES

1. Did the district court err by awarding consequential damages of $8,000?

2. Did the district court abuse its discretion by awarding general damages of $22,829?

of law are reviewed de novo. Alpha Real Estate Co. v. Delta Dental Plan, 664 N.W.2d 303, 311 (Minn.2003).

[1][2] The first issue raised by USA is whether the district court erred in awarding consequential damages to

DeRosier for delayed construction. USA argues that consequential damages were not alleged in the complaint, dis-

closed in discovery, or supported by any specific evidence presented at trial. Questions regarding what must be spe-

Code, the supreme court stated: “[A]lthough remedies are to be liberally administered, the burden of pleading and

proving consequential loss still remains on the buyer [alleging the damage].” Bemidji Sales Barn, Inc. v. Chatfield,

312 Minn. 11, 15, 250 N.W.2d 185, 188 (1977) (quotations and citations omitted) (emphasis added). To understand

the phrase “consequential loss” or “consequential damages” and the issue before us, we must recognize the differ-

ence between general and special damages. Special damages require specific pleading but general damages do not.

general damages separate from consequential damages), review denied (Minn. Apr. 26, 1985). Consequential dam-

ages are commonly called special damages. 22 Am. Jur. 2d Damages § 629 (2009). Special damages are the natural,

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780 N.W.2d 1

(Cite as: 780 N.W.2d 1)

but not the necessary, result of a breach. Smith v. Altier, 184 Minn. 299, 300, 238 N.W. 479, 479 (1931). Although

special or consequential damages flow naturally from the breach, they are not recoverable unless they are reasonably

(Minn.App.2004).

In this case the district court relies on the following rule to allow the recovery:

If evidence is objected to at the trial on the ground that it is not within the issues raised by the pleadings, the court

may allow the pleadings to be amended and shall do so freely when the presentation of the merits of the action

will be subserved thereby and the objecting party fails to satisfy the court that admission of such evidence would

claim for delay damages in the pleadings or discovery. Perhaps most significantly, no evidence of monetary loss

caused by delay was introduced at trial. Although the district court observed that DeRosier's attorney specifically

mentioned delay in his pre-litigation demand, that did not constitute evidence of such damages. In sum, there was no

occasion for USA to object to evidence that would support the claim.

Because consequential (or delay) damages were not pleaded and not supported by any evidence in the record,

Leoni v. Bemis Co., 255 N.W.2d 824, 826 (Minn.1977) (quotation omitted). A reviewing court will defer to the dis-

trict court's credibility determinations. Minn. R. Civ. P. 52.01. We extend this deference to the evaluation of written

statements and testimonial depositions. See Straus v. Straus, 254 Minn. 234, 235, 94 N.W.2d 679, 680 (1959) (

“Conflicts in the evidence, even though the presentation is upon affidavits, are to be resolved by the trial court.”).

DeRosier's primary witness regarding the cost of removal was G & T owner Dan Johnson, who testified by

items of equipment used, the time it took, and the equipment and labor expense. With this context, we conclude the

evaluation of Johnson's deposition was a credibility determination for the district court.

FN2. There is no issue regarding the proper qualification of Johnson's deposition as a part of the trial rec-

ord. It was presented to the district court and DeRosier's legal counsel argued extensively regarding its sig-

nificance.

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These allegedly extra costs include excavation at the site that was necessary for the construction, removal of vegeta-

tion, and compaction of the fill. USA does not clearly identify any specific portion of Johnson's testimony or exhib-

its that involve work for such tasks or was otherwise unrelated to removal of excess fill deposited by USA. In fact,

the record indicates that G & T's total charges for excavating and moving fill, sod, and other materials at the proper-

III.

[10][11] The third issue is whether DeRosier had a duty to mitigate damages that was breached by his failure to

accept USA's offer to remove excess fill for $9,500. USA claims that, even if the actual-damage award was support-

ed by the evidence, recoverable damages are limited to its $9,500 offer. FN3 DeRosier responds that he was not obli-

gated to do business with USA after its breach and that such an arrangement would have jeopardized his ability to

[12][13] We first note that if USA had merely offered to cure, DeRosier would have been obliged to accept to

mitigate damages. See Bruner & O'Connor on Construction Law § 19:21 (2002) (noting that right to cure serves

policy of mitigating damages). An implied right to cure exists in situations where cure is possible. See Zobel & Dahl

Constr. v. Crotty, 356 N.W.2d 42, 45 (Minn.1984) (finding no error in jury instruction stating contractor had right to

enter premises and cure defects if he had substantially completed project and received notice of defect); Bruner &

construction require vendees to provide notice of and opportunity to repair defects within a reasonable time follow-

ing home-sale or home-improvement contracts. Minn.Stat. §§ 327A.02, .03 (2008).

[14] Here, DeRosier notified USA of the defective performance, requesting that the excess fill be removed un-

der threat of lawsuit. See Blaine Econ. Dev. Authority v. Royal Elec. Co., 520 N.W.2d 473, 477 (Minn.App.1994)

(stating requirements for effective notice). USA, however, only offered to fix the fill problem on condition that

reasonable way to mitigate damages. County of Blue Earth v. Wingen, 684 N.W.2d at 924; Restatement (Second) of

Contracts § 350 (1979). Acceptance of USA's offer would have saved DeRosier over $13,000. The issue, then, is

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780 N.W.2d 1

(Cite as: 780 N.W.2d 1)

whether rejection of that offer was unreasonable.

Outside of employment situations, one reported Minnesota court decision has considered whether it is unrea-

Light & Power Co., 87 Minn. 56, 91 N.W. 265 (1902). In Coxe, the supreme court held that a buyer who contracted

to purchase goods on credit did not have to accept an offer of the same goods for a cheaper cash price. Id. at 57–58,

91 N.W. at 265–66. The court reasoned that imposing the new contract as a mitigation requirement would “entirely

abrogate[ ] the contract as made by the parties, and force[ ] upon them another and wholly different one, made by

the court.” Id. at 58, 91 N.W. at 266. The rationale of Coxe would not require such agreements to mitigate, especial-

contract with him”); City Nat'l Bank v. Wells, 181 W.Va. 763, 384 S.E.2d 374, 384 (1989) (“[T]he plaintiff here

justifiably revoked his acceptance of the defective truck and had no obligation to afford the defendant yet another

opportunity to repair it.”).

[16][17][18] We conclude that when one party to the contract defectively performs and subsequently offers to

correct the breach through a new contract, the nonbreaching party may generally decline the offer and still recover

FN4. “Accord and satisfaction acts to discharge a contract or a cause of action. It is itself an executed con-

tract, and it may be expressed or implied from circumstances which clearly and unequivocally indicate the

intention of the parties.” Roaderick v. Lull Eng'g Co., 296 Minn. 385, 389, 208 N.W.2d 761, 764 (1973).

Although it is not evident that USA intended the new offer to constitute accord and satisfaction, DeRosier

claims he feared that a new agreement might constitute a waiver of his rights under his original contract.

offer, and therefore did not improperly fail to mitigate his general damages. We modify the judgment to the amount

of the award for general damages: $22,829.FN5

FN5. The district court's January 8 order awarded $22,829 in general damages, awarded $8,000 in conse-

quential damages, and combined the two damages figures for a total of $30,289, apparently transposing two

figures. The correct sum is $30,829. Because we reverse the award of consequential damages and accept

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780 N.W.2d 1

(Cite as: 780 N.W.2d 1)

Affirmed in part and reversed in part.

Minn.App.,2010.