2007-04-17 SEH Memorandum in SupportAPR,17.2007 3:22PM COLEMAN NULL & VAN V
NO. 316 P. 10
STATE OF MINNESOTA
DISTRICT COURT
COUNTY OF WRIGHT TENTH JUDICIAL DISTRICT
* * * * * * * * * * * * * * * * * * * * * * * * * * Declaratory Judgment/Breach of Contract
Gold Key Development, Inc.,
File No. 86-CV-06-2998
Plaintiff,
lk""
City of Albertville,
Defendant and Third -Party Plaintiff,
VS.
Short -Elliott -Hendrickson, Inc.,
Third -Party Defendant.
T/C Homes, Inc.,
Plaintiff,
VS.
Gold Key Development, Inc.,
Defendant and Third -Party Plaintiff,
VS.
Hedlund Engineering, Inc.
Third Party Defendant
VS.
City of Albertville,
Defendant/Third Party Plaintiff,
rr.IP
Short -Elliott -Hendrickson, Inc.,
Third -Party Defendant.
File No. 86-CV-06-4997
APR. 17.2007 3:22PM COLEMAN HULL & VAN V N0, 316 P. 11
SNORT-ELLIOTT-HENDRICKSON, INC.'S MEMORANDUM IN
SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT
INTRODUCTION
At issue is whether an engineering firm, hired to serve as City Engineer, owes a
duty to a developer/builder who submits a plat for review by the City, when the
developer/buildex did not hire or enter into any contract with the engineering firm.
Because the engineering firm under these facts owes no statutory, common-law or
contractual duty to the developer/builder, neither an action in negligence nor breach of
contract can be sustained.
BACKGROUND AND PROCEDURAL HISTORY
Short Elliott Hendrickson, Inc. ("SEH") served as the City Engineer for the City
of Albertville ("City") during the design and construction of the Prairie Run Planned Unit
Development (the "Project"), located in Albertville, Minnesota. The Project contains a
residential component, developed by Gold Key Development, Inc., ("Gold Key"), and a
commercial component, developed by the City. The Project is owned by Gold Key, who
hired Hedlund Engineering, Inc. ("Hedlund") to perform the civil engineering design for
the residential portion of the Project. Gold Key later entered into contracts with several
home builders to purchase lots, including plaintiff T/C Homes, Inc. ("T/C" ).
The City initially approved the Project and then later decided to stop issuing
building permits for several lots due to flooding concerns. Gold Key and T/C sued the
City, alleging that the City breached the development agreement by stopping work on the
Project after the Project was approved. Gold Key and T/C have now brought direct
claims against SEH, alleging engineering negligence and third -party beneficiary claims
under the contract between the City and SEH. Gold Key and T/C allege that SEH owed
APR. 17. 2007 3:22PM COLEMAN HULL & VAN V NO. 316 P. 12
them a duty to review the engineering submissions from. Hedlund and catch any errors
made by Hedlund when it calculated its grading elevations.
Pursuant to General Rule of Practice for District Courts 115.03(d)(2), the
following documents are identified as comprising the record on which this motion is
MIM 11M
1. Gold Key's Complaint and Amended Cross Claim Against SEH,
previously filed with the Court on or about March 22, 2007;
2. T/C Homes Complaint and Amended Cross Claim Against S1?H,
previously filed with the Court on or about April 13, 2007;
3. Affidavit of John A. Markert dated April 17, 2007, attaching the following
exhibits:
A. a true and correct copy of relevant excerpts of the transcript of the
deposition of Adam Nafstad, dated January 3, 2007 (hereinafter
"Nafstad Depo. ");
E. a true and correct copy of relevant excerpts of the transcript of the
deposition of Dean Johnson, dated February 2, 2007 (hereinafter
"Johnson Depo.");
C. a true and correct copy of relevant excerpts of the transcript of the
deposition of Randy Hedlund, dated March 7, 2007 (hereinafter
"Hedlund Depo " );
D. a true and correct copy of relevant excerpts of the transcript of the
deposition of Peter Carlson, dated March 9, 2007 (hereinafter "Carlson
Depo.");
E. a true and correct copy of relevant excerpts of the transcript of the
deposition of Robert Moberg, dated March 9, 2007 (hereinafter
"Moberg Depo. ");
F. a true and correct copy of relevant excerpts of the transcript of the
deposition of James Schulz, dated March 12, 2007 (hereinafter
"Schulz Depo.");
0. a true and correct copy of relevant excerpts of the transcript of the
deposition of Larry Kruse, dated March 13, 2007 (hereinafter "Kruse
Depo..");
H. a true and correct copy of deposition exhibit no. 35, the Development
Agreement between Gold Key and the City dated July 16, 2004;
APR. 17, 2007 3:22PM COLEMAN HULL & VAN V NO, 316 P. 13
I. a true and correct copy of deposition exhibit no. 38, a letter from
Colleen Allen of Wright Soil and County Conservation District dated
October 1, 2004;
J. a true and correct copy of deposition exhibit no. 39, a letter fxom City
Attorney Michael Couri, dated November 29, 2005;
K. a true and correct copy of deposition exhibit no. 54, a letter from
Randy Hedlund to Todd Udvig of SEH, dated October 13, 2004;
L, a true and correct copy of deposition exhibit no. 58, the professional
services agreement between SEH and the City, dated July 18, 1994;
and
M. a true and correct copy of deposition exhibit no. 95, a letter from
City's attorney Jason Kuboushek, dated March 13, 2007.
STATEMENT OF THE UNDISPUTED FACTS
SEH became the City's Engineer after entering into a professional services
agreement ("Services Agreement") with the City in July 1994. (See Affidavit of John A.
Markert, (hereinafter "Markert Aff."), Ex, L). SEH's duties as City Engineer are not
defined in the Services Agreement; but it is undisputed that part of SEH's services as
City Engineer included reviewing, on behalf of the City, engineering submissions from
developers for proposed subdivisions. (Carlson Depo., pg. 170, In, 6-25; pg. 171, In. 1-
10)
Gold Key began to develop concepts plans for the Project in December 2002.
(Hedlund Depo., pg. 24, In. 16-25; pg. 25, In. 1-12). In December 2003, Gold Key
submitted plans for the Project that were drafted by Hedlund and showed a 100-year high
water level ("100-year HWL") of 948.5 feet. (Hedlund Depo., pg. 69, In. 2-25; pg. 70, In.
1-25; pg. 71, In. 1-10) The City's subdivision and zoning ordinances use the height of
the 100-year HWL as one of the factors to determine the height of the building pad
elevations in a given development. (Gold Key Complaint, paragraph 37) Hedlund used
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the line of permanent aquatic vegetation located on the site to set the I00-year HWL.
(Hedlund Depo., pg. 86, In. 22-25; pg. 87, In. 1-24) The use of the aquatic vegetation
line is allowed if no data is available for a more accurate I00-year HWL. (Gold Key
Complaint, paragraph 37; Markert Aff, Ex. H, paragraph 13,1.) Even though Hedlund
used a 100-year HWL based on the aquatic vegetation line, Hedlund admits that it
undertook no investigation through either the City or Wright County to see if a different
100 year HWL was established in•the area of the Project. (Hedlund Depot, pg. 110, In.
21-25; pg. 111, In. 1-25) SEH did not perform a review of Hedlund's calculation of the
100-year HWL. (Carlson Depo., pg. 69, In. 5-13)
In January 2004, the City determined that it would develop a portion of land
adjacent to the east of the Project for commercial purposes. (ld„ pg, 97, In. 19-25; pg. 98,
In. 1-25; pg. 99, In. 1-13) The Project, as eventually approved, contained a residential
component, developed by Gold Key, and a commercial component, developed by the
City. (ld., pg. 48, hi. 7-25; pg. 49, In. 1-8) SEH served as the design engineer for the
commercial component of the Project, designing the sewers, streets and other
infrastructure items, as well as designing the grading and storm water systems. (Id., pg.
48, In. 7-18)
SEH began working on the design for the commercial portion in February 2004.
(Schulz Depo., pg. 14, In. 5-22) In April 2004, Jim Schulz, an engineer for SEH working
on the commercial portion of the Project, informed Hedlund that SEH had come across a
100-year HWL of 950.5 relating to County Ditch No. 9. (Id., pg. 27, In. 7-25; pg. 28, la.
1-8; Hedlund Depo., pg. 100, In. 14-25; pg. 101, In. 1-25; pg. 102, In. 1-13) Hedlund
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adjusted its design to incorporate the higher 100-year H WL, raising the elevations on
several lots. (Hedlund Depo., pg. 101, In. 11-25; pg. 102, In. 1-13).
The final plans for the Project incorporated Hedlund's design for the residential
portion of the Project with SEH's design of the commercial portion of the Project.
(Schutz Depo„ pg. 45, In. 2-25; pg. 46, In. 1-16) Each engineering firm remained
responsible for its portion of the Project: design. (Schulz Depo., pg. 49, In. 9-25; pg. 50,
In. 1-7; Hedlund Depo.., pg;-134; In; 12-23) - The Project was then let for bid with the
infrastructure work for both portions of the Project, deemed "Municipal Improvements"
by the City, to be performed by one contractor with costs shared by Gold Key and the
City. (Carlson Depo., pg. 108, In. 17-23) The City Council approved the Prairie Run
Project on June 7, 2004 and the City of Albertville Planned Unit Development
Agreement for Prairie Run ("Development Agreement") was signed by Gold Key and the
City on July 16, 2004. (Marken Aff., Ex. H) Construction on the Municipal
Improvements commenced in late summer 2004. (Moberg Depo., pg. 10, In. 8-19)
On October 1, 2004, an official from Wright County Soil and Water District
wrote to SEH, Hedlund and others expressing concern about potential flooding of the
Project from the adjacent County Ditch No. 9. (Markert Aff., Ex. I) After reviewing the
concerns, Randy Hedlund wrote to SEH and Wright County and indicated that he had
taken potential flooding into consideration in his design and declined to revise the
grading plan for the residential portion of the Project. (Hedlund Depo pg. 92, In. 10-25;
pg. 93, In. 1-5; Markert Af ., Ex. K).
In the spring of 2005, SEH was replaced by Bolton Monk as the City's Engineer.
(Nafstad Depo., pg. 6, In. 23-25) In the fall of 2005, a rain event caused flooding in
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certain areas of the Project, although no homes were flooded. (Id., pg. 107, 1n. 12-23)
Bolton Menlo and the City looked into the flooding and decided to use a 100-year HWL
associated with a culvert replacement project on County Ditch No. 9 that occurred in
2000. (Id., pg_ 65, In. 11-25; pg. 66, In. 1-25; pg. 67, In. 1-25; pg. 68, In. 1-17) The new
100-year HWL adopted by the City was 951.5. (Markert Aff., Ex. J) After discussions
with the City and Bolton Menk, Hedlund issued a revised grading plan in October 2005,
which raised the,grade•on-lots that were not already built on. (Hedlund Dcpo:; pg. 93;-1n.
6-25; pg. 94, In. 1-11) On November 29, 2005, the City attorney issued a default letter to
Gold Key, claiming that it was in default under the terms of the Development Agreement
because some of the homes in the Project did not meet subdivision or zoning ordinances
using the new 100-year HWL. (Markert Aff:, Ex. J) The City stopped issuing building
permits and certificates of occupancy for any home in the Project that was out of
compliance. (Id.)
Gold Key and T/C homes objected to the City's actions and enlisted an attorney to
negotiate with the City. (Johnson Depo., pg. 87, In. 7-25; pg. 88, In. 1-12) The City,
through Bolton Menk, later determined that the 100-year HWL for the Project should be
dropped it to 949.90. (Nafstad Depo., pg. 68, In. 21-25) Even though the City has lowered
the 100-year HWL, it still will not issue any further building permits on the Project
because it believes the existing lot elevations are not in compliance with applicable
subdivision and zoning ordinances. (Kruse Depo., pg. 61, In. 17-25; pg. 62, In 1-25; pg.
63, In. 1-24; Marken Af ., Ex. M).
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P. 17
STATEMENT OF TB E ISSUES
Issue: Can Gold Key and T/C assert a negligence claim against SEH for its
provision of City Engineering services even though SEH only owed a
public duty when rendering those services?
Issue: Can Gold Key and T/C assert a third -party beneficiary claim against SEH
for SEH's alleged breach of its professional services contract with the
City?
LEGAL ARGUMENT
I. SUMMARY JUDGMENT STANDARD.
The purpose of summary judgment is "to separate the wheat from the chaff and
relieve the court system of the burden and expense of unfounded litigation." Cook v.
Connolly, 366 N.W.2d 287, 292 (Minn. 1985). Summary judgment is designed to secure
a just, speedy, and inexpensive determination of an action. DLH, Inc_ v. Russ, Inc., 566
N.W.2d 60, 68 (Minn. 1997). When, as here, there is no genuine dispute regarding the
material facts, and a party is entitled to judgment under the rules as a matter of law, the
court should order summary judgment. Id.; see also Minn. R. Civ. F. 56.03.
In deciding a motion for summary judgment, the court determines only whether a
genuine issue of material fact exists; it does not resolve issues of fact. Nord v. Herreld,
305 N.W.M 337, 339 (Minn. 1981). In making this determination, the court is allowed to
conclude that certain evidence has no probative value, such that reasonable persons could
not draw different conclusions based upon it. DLH, Inc., 566 N,W,2d at 70. Thus, a fact
is material only if its resolution will affect the outcome of the case. Valtakis v. Putnam,
504 N.W.2d 264, 266 (Minn. App. 1993). If a party "fails to make a showing sufficient
to establish the existence of an element essential to that party's case," summary judgment
is appropriate. lacona v. Schrupp, 521 N.W.2d 70, 72 (Minn. App. 1994).
A party opposing summary judgment "cannot rely upon general statements of fact
but rather must demonstrate at the time the motion is made that specific facts are in
existence which create a genuine issue for trial." Hunt v. IBM Mid -Am. Fed. Employees
8
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Credit Union, 384 N.W.2d 853, 855 (Minn. 1986); Minn. R. Civ. P. 56.05 (providing
party opposing summary judgment "may not rest upon the mere averments or denials of
the adverse party's pleadings"). Speculation, general assertions, and promises to produce
evidence at trial are not sufficient to create a genuine issue of material fact. DLH,, Inc.,
566 N.W.2d at 70. The non-moving party must submit significant probative evidence in
admissible form and cannot avoid summary judgment by expressing metaphysical doubt
as to a material fact. Bob Useldinger & Sons, Inc. v. Hangsleben, 505 N.W.2d 323, 328
(Minn, 1993); Minn. R. Civ. P. 56.05, If, as here, the non-moving party does not meet its
burden of producing facts that create a genuine issue, summary judgment "shall be
entered." Minn. R. Civ. P. 56.05; see also Thiele v. Stich, 425 N.W.2d 580, 583 (Minn.
1988).
TI. GOLD KEY AND T/C's CLAIMS AGAINST SETT FAIL BECAUSE SETT
OWES NO PRIVATE DUTY TO REVIEW GOLD KEY''S PLAT
SUBMISSIONS.
To proceed to a jury trial in its case against SEH, Gold Key (and T/C) must be
able to prove, as a threshold matter, that SEH owed it a duty, that SEH breached that
duty, and that as a result of that breach, it sustained damages. Only a statute, common
law rule or contract can create a legal duty. Service Master of St. Cloud v. GAB Business
Services, 544 N, W,2d 302, 307 (Minn. 1996). Whether one owes such a duty under the
particular circumstances is a question of law for the court. In re Norwest Bank Cases,
410 N.W.2d 875, 878 (Minn. App. 1997) (citing Germann v. FL. Smithe Machine Co.,
395 N.W.2d 922, 924 (Minn. 1986)),
The question of legal duty asks whether a defendant had any obligation to conduct
its activities with regard to the plaintiff who claims the defendant caused it harm. If the
answer is "no," then the defendant's conduct toward the plaintiff need not be considered,
There can be no liability. See Rasmussen v. Prudential Ins. Co., 277 Minn. 266, 152
MW.2d 359,362 (1967) (holding "[1]acking duty, there can be no negligence"); see also,
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Prosser and Keeton, The Law of Torts, § 68 (5th ed. 1984) ("Being under no duty, [the
defendant] cannot be charged with negligence"). Only when such a duty exists as a matter
of law does the conduct of the defendant become relevant.
A. SEH Only Owed a Duty to the Public, Not Gold Key or T/C.
Minnesota courts distinguish between public duties — i.e., those duties owed to
the municipality as a whole — and special duties — Le., duties that one assumes to an
individual or a particular class of individuals. Cracra, ft v. City of St. Lours Park, 279
N, W.2d 801, 804 (Minn. 1979); Hoffert v. Owatonna Inn Towne Motel, Inc., 199 N.W.2d
158 (Minn. I972). The distinction between public duty and special duty is not limited to
government defendants. Rather, the Cracraft court specifically noted that the distinction
,,applies to alleged private tortfeasors as well as alleged public tortfeasors." Id. at 804; see
also In re Norwest Bank Cases, 410 N.W.2d 875 (holding insurance agency's inspection
of predemolition damage to building near demolition site did not impose common-law
duty on insurance agency to protect neighbors from fire hazard).
In Hoffert, the supreme court refused to recognize a tort action by guests of a
hotel that were injured in a hotel fire after the municipal fire inspector failed to perform
his duties. 293 Minn. at 222, 199 N.W.2d at 160. The court held that "[i]n order to
recover against the city, [a plaintiff] must show a breach of some duty owed them in their
individual capacities and not merely a breach of some obligations owed the general
public." Id. at 222, 199 N.W.2d at 160. In reaching its decision, the court noted that
building codes and zoning ordinances are for the benefit of the public and that a city does
not become the insurer for private individuals once a building permit is issued:
Building codes, the issuance of building permits, and building inspections
are devices used by municipalities to make sure that construction within
the corporate limits of the municipality meets the standards established.
As such, they are designed to protect the public and are not meant to
be an insurance policy by which the municipality guarantees that each
building is built in compliance with building codes and zoning codes.
The charge for building permits is to offset expenses incurred by the city
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in promoting this public interest and is in no way an insurance premium
which makes the city liable for each item of defective construction in the
premises.
Id at 223, 199 N.W.2d at 160 (emphasis added). The court concluded that a building
inspector acts exclusively for the benefit of the public, and because the act is performed
solely for the public benefit, "an individual who is injured by any alleged negligent
performance of the building inspector in issuing the permit does not have a cause of
action." Id. (citing Roerig v. Houghton, 144 Minn. 231, 235, 175 N.W. 542, 544 (1919)).
14ere, SEH played a role similar to that of the building inspector in Hoffert, As
City Engineer, SEH was to review designs submitted by developers and builders to
determine if they generally conformed to the City's subdivision ordinances and zoning
ordinances. These subdivision and zoning ordinances were enacted by the City to benefit
and protect the public.' For this reason, SE14's duty to review a developer's plans to
determine if they conform to subdivision and zoning ordinances is exclusively a duty to
the public — the party whom the ordinances are intended to protect.
1n performing its public duty, SEH would draft a report: for the City Council either
recommending approval of the developer's plans or listing deficiencies that needed
1 The stated purpose of the City's subdivision ordinances, 11-1-1 et seq., is as follows:
This title is adopted for the following purposes:
A. To encourage well planned, efficient and attractive subdivisions by establishing
adequate and impartial standards for design and construction;
B. To provide for the health and safety of residents by requiring properly designed streets
and adequate sewer and water service;
C. To place the cost of improvements against those benefiting from their construction;
A. To secure the rights of the public with respect to public lands and waters; and
E. To set the minimum requirements necessary to protect the public health, safety,
comfort, convenience and general welfare, (Amended Ord. 1988-8, 9-8-1988)
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correcting prior to final approval. Like the building inspector's actions in Hgffert, any
review performed by SEH did not guarantee that the developer's plans were free of
defects or that the plans met all subdivision and zoning ordinances. Thus, SEH was not
taking on the responsibility or duty of insuring that Gold Key's plans were free from
error, and Gold Key cannot assert that it relied on SEH to do so. To the contrary, the
Development Agreement between the City and Gold Key makes it clear that it is Gold
Key's obligation to provide a plat plan that met all codes and ordinances. It states:
Developer represents to the City that Said flat complies with all City,
county, state and federal laws and regulations, including but not limited to:
subdivision ordinances, zoning ordinances, and environmental regulations.
Developer agrees to obtain all required federal, state and local permits. If
the City determines that Said Plat does not comply, the City may, at its
option, refuse to allow construction or development work in the plat until
Developer so complies. Upon City's demand, the Developer shall cease
work until there is compliance.
(Markert Aff., Ex. H, paragraph 13, F.) The contract language between the City and
Gold Key makes it clear that any plan review, or lack of review, by SEH does not relieve
Gold Key of its duty to ensure that its plans conformed with all applicable ordinances and
regulations.
Despite the fact that Hedlund and Gold Key conducted no investigation to
determine if a I00-year HWL existed for the Project, Gold Key and T/C are alleging that
SEH, as City Engineer, had a duty to ensure that Hedlund's grading elevations conformed
to the City's ordinances in all respects. Not only does this shift the burden of ensuring
conformity to the wrong party, but it also puts a City Engineer such as SEH in the
position of having to warrant the design put forth by a developer's engineer. This shift of
burden is contrary to the public policy announced in Hoffert, and would place City
Engineers and other reviewing officials in a position of taking on liability that should be
borne by the developer's engineer. Just as a building inspector is not liable for missing a
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building code violation that results in damage, SEH is not liable for missing an elevation
in Hedlund's design that does not meet ordinance requirements.
If Gold Ivey and TIC believe they have been damaged due to Hedlund's incorrect
grading elevations, then they have a cause of action against Hedlund for its engineering
negligence, Simply because Gold Key and TIC have chosen not to pursue a cause of
action against Hedlund does not create a cause of action against SEH. Accordingly,
neither Gold Key nor TIC can bring a private cause of action against SEH for negligently
performing its public duty because that duty was only intended to benefit the public as a
whole, and not Gold Key or T/C individually.
S. SEH did not .Assume a Private Duty to Gold Key or TIC.
There are instances where a party that owes a public duty can assume a private
duty to certain persons. In Cracraft, the supreme court held that inspection functions
performed on behalf of the general public are immune from a negligence action, but that
suit could be brought if a private duty is assumed by the person performing the public
duty. Id. at 806. In determining whether a "special" duty is assumed, a court must
determine whether; (1) the municipality had actual knowledge of the dangerous
condition; (2) there was reasonable reliance on specific representations or conduct of the
municipality; (3) there is a statutory scheme setting forth "mandatory acts clearly for the
protection of a particular class of persons rather than the public as a whole"; and (4) the
municipal action increases the risk of harm. Id. at 806-07.
In this matter, SEH had no actual Iaaowledge of any dangerous condition; it did
not make any specific representations to Gold Key that its plans met subdivision and
zoning ordinance requirements relating to building elevations; there is no statutory duty
requiring SEH to act on behalf of Gold Key; and SEH did nothing to increase the risk of
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harm in any way. The record establishes that the City decided to approve the plat
submittals by Gold Key without review of the grading plans by SEH. SEH was unaware
of any problems with Gold Key's plans. SEH did eventually become aware of an alleged
problem with the building elevations, but Gold Key and T/C were informed of the
problem by the City at essentially the same time. Finally, the lack of review by SEH did
not increase the risk that Gold Key's plans were out of compliance with applicable
ordinances; that risk existed from the time Hedlund, Gold Key's engineer, decided not to
investigate whether there was a known 100-year HWL for the area, and instead
proceeded with its design based on the line of permanent aquatic vegetation..
Because Gold Key and T/C cannot establish that SEH owed either of them a
private duty of care, the decisions in Ftoffert and Cracraft mandate that their negligence
claims against SEH be dismissed. As a matter of law, SEH is entitled to summary
judgment and Gold Key and T/C's negligence claims against SEH must be dismissed in
their entirety.
M. GOLD KEY AND T/C CANNOT ESTABLISH THAT THEY ARE
THIRD -PARTY 13ENEFICURMS TO THE CONTRACT
BETWEEN SEH AND THE CITY.
In addition to their negligence claims, Gold Key and T/C also claim that they are
thud -party beneficiaries to the contract between the City and SEH, even though neither is
a parry to the Services Agreement. The facts and the law do not support this claim.
Generally, strangers to a contract acquire no rights under the contract. Wurm v.
John Deere Leasing Co., 405 N.W.2d 484, 486 (Minn. App. 1987). Under Minnesota
law, however, a third party can recover as an intended beneficiary if either the duty -owed
or intent -to -benefit test is met, Cretex Companies, Inc. v. Construction Leaders, Inc. 342
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N.W.2d 135, 139 (Minn. 1984). To determine if a third party such as Gold Key or T/C
can recover as an intended beneficiary, the court looks to see if the contract indicates an
"intent to benefit" or a "duty owed". Mears Park Holding v. MorseDDiesel, Inc., 427
N.W.2d 281, 285, (Minn. Ct. App. 1988) (citations omitted). Neither Gold Key nor T/C
qualifies as an intended beneficiary under either test.
A. Gold Key and T/C Cannot Establish axa Intent -to -Benefit.
The intent -to -benefit test is satisfied if "the circumstances indicate that the
promisee intends to give the beneficiary the benefit of the promised performance." Mears
Park Holding Corp. v. Morse/Diesel, Inc., 427 N.W.2d 281, 285 (Minn. App. 1998). To
determine if the necessary intent exists, the court must look to the contract language "in
light of all the surrounding circumstances" Buchman Plumbing Co. v. Regents of the
University of Minnesota, 298 Minn. 328, 335, 215 N.W.2d 479, 483 (Minn. 1974).
"Generally, when there is no reference to the third party in the contract, there is no intent
to benefit" 614 Co. v. Mpls. Comm'ty Dev. Agency, 547 N.W.2d 400,410 (Minn. App.
1996).
In light of all the surrounding circumstances, the evidence establishes that neither
the City nor SEH intended to benefit Gold Key or VC when SEH agreed to become City
Engineer. To begin, the Services Agreement was signed in 1994, eight years before Gold
Key first proposed developing the Project. SEH's contract with the City does not
mention #ny third parties, much less Gold Key or T/C. In fact, the Services Agreement
contains a clause that expressly states that there are to be no third parties to the contract:
Exclusive of paragraph 5.4.2 above, nothing in this Agreement shall be
construed to give any rights or benefits in this agreement to anyone other
than OWNER and ENGINEER, and all duties and responsibilities
undertaken pursuant to this Agreement will be for the sole and exclusive
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benefit of OWNER and ENGINEER and not for the benefit of any other
pity
(Markert Af ., Ex. L, paragraph 5.6.2.) Thus, there is nothing that Gold Key or T/C can
point to in the Services Agreement that would indicate that they were the intended
beneficiary of that contract.
While Gold Key and T/C may claim that they should have benefited from the
Services Agreement, they are at best an "incidental beneficiary" of that contract. See e_
g., Buchman 215 N.W.2d at 484 (holding if performance is rendered to the promisee, the
third party who also may be benefited is an incidental beneficiary with no right of
action). As an incidental beneficiary, neither Gold Key nor T/C can enforce the contract
between the City and SEH. Wurm, 405 N, W.2d at 486.
B. Gold Key and T/C Cannot Establish a Duty -Owed by SEH.
The duty -owed test is met if the promisor's (SEH) performance under the contract
discharges a duty that the promisee (the City) owes to the third party (Gold Key or T/C).
Cretex Companies, Inc., 342 N. W.2d at 138. When SEH was performing its role as the
City Engineer, it was not discharging a duty that the City owed to Gold Key or T/C.
There is no contract between the City and T/C, and thus, the City has no contractual
duties to T/C.
Under the Development Agreement, it is Gold Key and not the city that has the
obligation to ensure that the design for the Project "complies with all City, county, state
and federal laws and regulations including but not limited to: subdivision ordinances,
zoning ordinances, and environmental regulations." (Markert Aff., Ex. H, paragraph 13,
F.) Here, Gold Key owed a duty to the City to make sure its design complied with the
ordinances pertaining to building elevations. The reverse, however, is not true.
16
APR. 17, 2007 3:24PM COLEMAN HULL & VAN V N0, 316 P. 26
Consequently, neither Gold Key not T/C can assert that SEH was discharging a duty
owed to them by the City when it performed its duties as City Engineer.
Because neither Gold Key nor T/C can demonstrate that they are intended
beneficiaries under either the duty -owed or intent -to -benefit test, the court should dismiss
Gold Key's and T/C's breach of contract claim against SEH.
CONCLUSION
Because the undisputed facts establish that SEH did not owe Gold Key or T/C a
duty, there can be no breach and, thus, no action for negligence as a matter of law. The
undisputed facts also establish that neither Gold Key nor T/C can establish third -party
beneficiary claims against SEH. Therefore, SEH respectfully requests that this court
grant it judgment in its favor and dismiss Gold Key's and T/C's claims against it.
COLEMAN, HULL & VAN VLiET, PLLP
April -9-, 2007. By Zl
Mafk J. Heley (#159116)
John A. Markert (#308511)
8500 Normandale Lake Boulevard
Suite 2110
Minneapolis, Minnesota 55437
952-841-0001
Attorneys for Defendant and Third -Parry
Defendant Short -Elliott -Hendrickson, Inc.
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