author: HANSON, Justice. ANDERSON, RUSSELL A., Justice BLATZ, C.J. PAGE, J.

text:
    RIVER VALLEY TRUCK CENTER, INC., Appellant, v. INTERSTATE COMPANIES, INC., d/b/a Interstate Detroit Diesel, Respondent.
    No. A03-1273.
    Supreme Court of Minnesota.
    Sept. 29, 2005.

      Robert L. Demay, Clare Ellen Tuyet Priest, Alison Crawford Archer, Leonard, Street & Deinard, Minneapolis MN, for Appellant.
    Lee Alan Henderson, Minneapolis MN, for Respondent.
   OPINION

HANSON, Justice.

Respondent Interstate Companies, Inc., d/b/a Interstate Detroit Diesel, is the exclusive wholesale distributor of Detroit Diesel engines and parts in a region that includes Minnesota. Appellant River Valley Truck Center, Inc. sells heavy-duty trucks manufactured by International Truck and Engine Corp. and also was an authorized Detroit Diesel dealer. In 2002, International stopped offering Detroit Diesel engines as an option in its new heavy-duty trucks. In response, Interstate notified River Valley that its Detroit Diesel dealership agreements would not be renewed. River Valley brought an action under Minnesota’s Heavy and Utility Equipment Manufacturers and Dealers Act (HUEMDA), Minn.Stat. §§ 325E.068-.0684 (2004), claiming that Interstate did not have “good cause” for nonrenewal. The district court denied River Valley’s motion for permanent injunctive relief and entered summary judgment for Interstate. The court of appeals affirmed. River Valley Truck Ctr., Inc. v. Interstate Cos., Inc., 680 N.W.2d 99 (Minn.App.2004). We likewise affirm.

As a wholesale distributor, Interstate appoints a network of Detroit Diesel dealers to engage in aftermarket operations relating to Detroit Diesel engines. Generally, any dealer for a truck manufacturer that offers Detroit Diesel engines as an option in its products is eligible to become a Detroit Diesel dealer. Historically, all of the major heavy-duty truck manufacturers offered their customers a choice of various engines, including Detroit Diesel, Cum-mins, and Caterpillar. Consequently, most of the heavy-duty truck dealers in Interstate’s region became Detroit Diesel dealers.

For its International truck dealerships in Mankato and New Ulm, River Valley signed “Detroit Diesel Dealer Agreements” with Interstate to become an authorized Detroit Diesel dealer. Interstate renewed River Valley’s dealership agreements through 2002. Under the dealership agreements, River Valley could purchase Detroit Diesel engines and parts at reduced dealer pricing and River Valley was authorized to perform warranty service work on Detroit Diesel engines.

In April 2002, as a result of a confluence of forces — a general downturn in the economy, global consolidation in the heavy-duty trucking industry, and new emission standards for diesel engines — International announced its decision to stop offering Detroit Diesel engines as an option in new trucks, effective in October 2002, and directed its dealers to “begin immediately converting [their] customers to Cummins or Caterpillar.” Interstate acknowledges that International’s decision to stop offering Detroit Diesel engines “was not met with approval” by many International dealers. According to Interstate, the Detroit Diesel Series 60 engine was “the number one selling heavy duty truck engine for 10 years.” Many International dealers tried unsuccessfully to persuade International to reverse its decision.

In response to International’s decision, in November 2002, Interstate notified River Valley and other International truck dealers in the region that their Detroit Diesel dealership agreements would not be renewed for 2003. The notice to River Valley explained that because of International’s “decision not to offer the Series 60 engine after September 30, 2002,” “your Dealership will no longer be able to meet” the sales and promotion responsibilities of the dealership agreements and “therefore you cannot be in compliance with the agreements.”

River Valley requested that Interstate withdraw the notice of nonrenewal. River Valley told Interstate that their dealership agreements were protected by HUEMDA, which provides that no equipment manufacturer “may terminate, cancel, fail to renew, or substantially change the competitive circumstances of a dealership agreement without good cause.” Minn.Stat. § 325E.0681, subd. 1 (2004). River Valley claimed that Interstate did not have “good cause” to fail to renew the dealership agreements because Interstate’s decision did not “relate to any act or omission by River Valley or, indeed, anything over which River Valley has control.”

Interstate extended the termination date but refused to withdraw its notice of non-renewal, continuing to maintain that International’s decision not to include Detroit Diesel engines “makes it impossible for River Valley” to meet the obligations of a dealer to promote and sell Detroit Diesel products, and therefore “good cause exists to terminate the dealer agreements.” Interstate informed River Valley that the dealership agreements would terminate on February 20, 2003, unless River Valley could establish a relationship with another truck manufacturer that included Detroit Diesel engines as part of its product offering. River Valley was unable to establish such a relationship.

River Valley brought this action against Interstate under HUEMDA, claiming that Interstate did not have good cause to terminate the dealership agreements. River Valley sought damages and attorney fees, as well as injunctive relief to prevent Interstate from terminating the dealership agreements. See Minn.Stat. § 325E.0684 (2004) (describing remedies available under HUEMDA).

River Valley moved for a permanent injunction, and Interstate cross-moved for summary judgment. The parties agreed that the district court could decide the issues summarily on the facts presented, without a trial, and the district court treated the two motions as cross-motions for summary judgment. In an “Order for Judgment Re: Injunctive Relief,” the district court denied River Valley’s request for permanent injunctive relief and ordered that summary judgment be entered for Interstate. The district court concluded that Interstate had good cause to terminate the dealership agreements because River Valley had “participate[d] in driving Detroit Diesel out of business.” However, the district court temporarily enjoined Interstate from terminating the dealership agreements pending the resolution of any appeals.

The court of appeals considered River Valley’s appeal as one from summary judgment and affirmed, concluding Interstate had good cause for the nonrenewal of River Valley’s dealership agreements. River Valley Truck Ctr., Inc., 680 N.W.2d at 106-07. The court held that, “as a matter of law, good cause existed for Interstate to not renew its dealership agreements with River Valley,” based on International’s decision to stop offering Detroit Diesel engines as an option in new trucks and International’s decision to encourage dealers to convert their customers from the purchase of Detroit Diesel engines to the purchase of other engines. Id. at 107.

We granted River Valley’s petition for further review and focused our inquiry on (1) whether, as a matter of contractual interpretation, River Valley has failed to substantially comply with the dealership agreements such that good cause for non-renewal may be found; and, if so, (2) whether, as a matter of statutory construction, Interstate was precluded by HUEM-DA from relying on River Valley’s noncompliance because it was the result of circumstances outside of River Valley’s control. On appeal from summary judgment, we determine whether there are any genuine issues of material fact and whether the district court erred in its application of the law. Vlahos v. R & I Constr. of Bloomington, Inc., 676 N.W.2d 672, 676-77 (Minn.2004).

I.

We first examine Minn.Stat. § 325E.0681, subd. 1, which requires an “equipment manufacturer” such as Interstate to demonstrate “good cause” to “terminate, cancel, fail to renew, or substantially change the competitive circumstances of a dealership agreement.” The statute defines “good cause” as a “failure by an equipment dealer to substantially comply with essential and reasonable requirements imposed upon the dealer by the dealership agreement, if the requirements are not different from those requirements imposed on other similarly situated dealers by their terms.” I'd

Interstate’s notice of nonrenewal cited River Valley’s noncompliance with “the specific Dealer requirements” in section 2.2.1 of the dealership agreements, entitled “Sales and Promotion Responsibilities,” which provides:

Dealer shall actively and effectively promote the sale of Products and Parts to owners and users of Products and to other potential customers located in Dealer’s Area of Responsibility. Dealer shall also advertise and promote its Dealer Operations and shall participate in sales, service and parts promotional programs recommended by Distributor and shall utilize and display reasonable quantities of literature and materials promoting Products and Parts.
If Dealer represents an OEM [original equipment manufacturer], Dealer shall promote the sale, and maintain in stock an appropriate number, of such OEM products equipped with Products.

The dealership agreements define an original equipment manufacturer (OEM) as “[a] manufacturer of vehicles or equipment which utilize or incorporate Products.” “Products” are “[n]ew or remanu-factured engines which are or have been marketed by or for Company [Detroit Diesel] and for which Dealer [River Valley] is appointed by Distributor [Interstate].” “Parts” are “[n]ew parts or remanufac-tured parts which are marketed by or for [Detroit Diesel] for use on, or in connection with, Products.”

Interstate first argues that River Valley failed to comply with the second paragraph of section 2.2.1, which, according to Interstate, requires River Valley to promote the sale of an OEM product that contains a Detroit Diesel engine. But the language in this paragraph is merely conditional, stating that if the dealer represents an OEM that offers Detroit Diesel engines, the dealer shall promote the sale and maintain in stock an appropriate number of such OEM products equipped with Detroit Diesel engines. This language cannot reasonably be read as a requirement that the dealer represent an OEM, and the sales and promotion responsibilities in this paragraph fall out of the agreements if the dealer does not represent an OEM that offers Detroit Diesel engines. Although River Valley did represent an “OEM,” as defined in the agreements, when International was making trucks that could incorporate Detroit Diesel engines, International no longer qualifies as an “OEM” because new International trucks can no longer accommodate Detroit Diesel engines. Therefore, the sales and promotion responsibilities in the second paragraph of section 2.2.1 no longer apply to River Valley.

But we separately examine whether River Valley failed to comply with the requirement in the first paragraph of section 2.2.1 to “actively and effectively promote the sale” of new or remanufactured Detroit Diesel engines and new or remanu-factored Detroit Diesel parts. In the context of the entire dealership agreements, we conclude that the parties intended the two paragraphs of section 2.2.1 to be independent of each other. By stating that the “dealer shall” take certain actions, the first paragraph imposes absolute contractual duties. By using the word “if’ to describe OEM representation, the second paragraph imposes conditional contractual duties. The absence of the condition that would trigger duties under the second paragraph does not relieve River Valley of its absolute duties under the first paragraph.

River Valley argues that it can fulfill the intent of the first paragraph without representing an OEM that offers Detroit Diesel engines because it can still sell Detroit Diesel parts and replacement engines to owners of trucks with Detroit Diesel engines, and can still perform warranty and other service work on trucks equipped with Detroit Diesel engines. But, when we view the agreements as a whole, we read the first paragraph as requiring River Valley to promote the sale of Detroit Diesel engines in each of two ways: (1) as part of the sale of new trucks to new owners and (2) through the sale of replacement engines to current owners. In fact, Interstate argues that the sale of new trucks with Detroit Diesel engines is the life blood of its business because, without it, the population of trucks requiring Detroit Diesel parts and service, or replacement engines, would ultimately dwindle to nothing. Thus, River Valleys inability to sell new trucks with Detroit Diesel engines prevents it from “actively and effectively” promoting the sale of such engines. And the fact that River Valley is able to comply with some other essential requirements of the agreements — i.e., selling replacement engines to current owners — does not eliminate good cause for nonrenewal if it cannot comply with this essential requirement.

It is true that the dealership agreements did not require River Valley to meet a specific quota of sales of Detroit Diesel engines or prohibit River Valley from selling trucks that included other engines. In other words, River Valley’s duty to “actively and effectively promote the sale of [Detroit Diesel engines]” was not made exclusive by the agreements, which allow River Valley to also promote the sale of other engines. In fact, when River Valley was initially made a dealer it was known that it sold International Trucks that could also contain Cummins or Caterpillar engines, at the customer’s choice.

But the critical distinction is that before International decided to eliminate Detroit Diesel engines from its trucks, River Valley could promote the inclusion of Detroit Diesel engines in its International Truck sales. Now, it cannot. After October 2002, so long as River Valley represents International as its sole OEM, River Valley cannot possibly promote the sale of Detroit Diesel engines in new truck sales. To the contrary, International specifically directed River Valley to “begin immediately converting your customers to Cummins or Caterpillar engines.”

Accordingly, we hold as a matter of law that River Valley has failed to substantially comply with the dealership agreements.

II.

River Valley argues that International’s decision to stop offering Detroit Diesel engines as an option in its new trucks was beyond River Valley’s control and therefore cannot constitute good cause for nonrenewal under HUEMDA. For support, River Valley references Minn. Stat. § 325E.0682(b)(4) (2004), which states that a manufacturer violates HUEMDA if it fails to renew a dealer “based on the results of a natural disaster, a labor dispute, or other circumstance beyond the dealer’s control.” We construe the words of a statute according to their plain meaning. Astleford Equip. Co. v. Navistar Int’l Transp. Corp., 632 N.W.2d 182, 188 (Minn.2001). The application of a statute to undisputed material facts presents a legal issue that we review de novo. Lefto v. Hoggsbreath Enters., Inc., 581 N.W.2d 855, 856 (Minn.1998).

We disagree with River Valley’s arguments for two reasons. First, we read the “other circumstance” language to only refer to a dealer’s temporary inability to perform, such as that caused by a natural disaster. Second, we agree with the court of appeals that River Valley’s failure to comply with the dealer agreements was not beyond its control because it could have cured its noncompliance by discontinuing its representation of International and/or establishing a relationship with another manufacturer that can accommodate Detroit Diesel engines.

By combining the catch-all “other circumstance” language with natural disasters and labor disputes, which typically involve circumstances of a temporary duration, it appears that the legislature did not intend that circumstances of a permanent or indefinite duration would be included within the scope of section 325E.0682(b)(4). This conclusion is bolstered by a decision from the Eighth Circuit Court of Appeals and by the language in similar statutes from neighboring states. See S. Implement Co., Inc. v. Deere & Co., 122 F.3d 503, 508 (8th Cir.1997) (holding that changes in the manufacturer’s relationship with the franchisee were not a “natural disaster” or among the “other circumstances beyond the dealer’s control” that would trigger the application of the Arkansas Farm Equipment Retailer Franchise Protection Act, which is comparable to HUEMDA); see also Iowa Code § 322F.7(7)(a) (2004) (including drought, flood, and economic recession as among “conditions beyond the dealer’s control”); N.D. Cent Code. § 51-07-01.2(5) (2004) (including “sustained drought or other natural disaster in the dealership market area” as examples of a “circumstance beyond the farm equipment dealer’s control”).

This reading of section 325E.0682(b)(4) is also bolstered by the Wisconsin Supreme Courts interpretation of the Wisconsin Fair Dealership Law (WFDL), on which HUEMDA was apparently patterned. See Astleford Equip. Co., 632 N.W.2d at 188 (examining Wisconsin precedent regarding language similar to HUEMDA). In Ziegler Co., Inc. v. Rex-nord, Inc., decided one year before HUEMDA took effect in Minnesota, the Wisconsin court held that an equipment manufacturers changed economic circumstances can constitute “good cause” for altering its relationship with its dealers and for failing to renew a dealership agreement with any dealer who refuses to comply with the manufacturers changes, as long as the changes are essential, reasonable and nondiscriminatory. 147 Wis.2d 308, 433 N.W.2d 8, 11-12 (1988); accord Morley-Murphy Co. v. Zenith Elecs. Corp., 142 F.3d 373, 377 (7th Cir.1998). The purpose of WPDL, according to the Wisconsin court, was to “equalize the power of grantors and dealers,” and not “to insulate dealers from all economic reality.” Ziegler Co., Inc., 433 N.W.2d at 12. The court rejected the argument that a manufacturer “must subordinate those problems — regardless how real, how legitimate, or how serious — in all respects and permanently if the dealer wishes to continue the dealership.” Id. at 11. The court noted that “the Wisconsin legislature could not have intended to impose an eternal and unqualified duty of self-sacrifice upon every grantor that enters into a distributorship-dealership agreement.” Id.

We find the reasoning of the Wisconsin court to be persuasive. Requiring Interstate to put River Valley’s interests ahead of its own, perhaps permanently, appears to be contrary to the purpose of HUEM-DA and would effectively eliminate the authority given to manufacturers in HUEMDA to not renew for “good cause.” See Minn.Stat. § 325E.0681. We conclude that the actions of International permanently, or at least indefinitely, made it impossible for River Valley to comply with the requirement to promote the sale of Detroit Diesel engines in new trucks so long as International is its only OEM.

Further, we agree with the court of appeals’ observation that the actions of International prevented River Valley from complying with the dealer agreements only so long as International was River Valley’s sole OEM. Those actions did not prevent River Valley from discontinuing its representation of International and seeking to represent another OEM that included Detroit Diesel engines in new trucks. It may well be, as the dissent argues, that this was not a practical or desirable solution for River Valley, but that does not mean that it was beyond River Valley’s control. Thus, even though River Valley could not control International, it did have the theoretical ability to return to compliance with the dealer agreements by securing another OEM. This was the cure specified in Interstate’s notice of nonrenewal.

For these reasons, we hold that HUEM-DA does not preclude Interstate from basing the nonrenewal of River Valley’s dealership agreements on the inability of River Valley to sell new trucks that contain Detroit Diesel engines.

Affirmed.

Dissenting, ANDERSON, RUSSELL A., PAGE, JJ., and BLATZ, C.J.

ANDERSON, RUSSELL A., Justice

(dissenting).

I respectfully dissent. To reach the conclusion that the dealership agreement requires River Valley to represent an OEM that offers Detroit Diesel engines, the majority ignores established principles of contract interpretation by (1) considering the sales and promotion responsibilities in the first paragraph of section 2.2.1 in isolation from the rest of the dealership agreement; (2) treating the failure to satisfy a conditional obligation as a breach; (3) rendering conditional language that specifically addresses a dealer’s representation of an OEM meaningless; and (4) resolving any conflict or ambiguity in the agreement against the dealer rather than the manufacturer that drafted the agreement. To reach the conclusion that Interstate may base its decision to terminate the dealership agreement on the actions of a third party, the majority disregards plain statutory language that prohibits a manufacturer from attempting to terminate a dealership agreement based on a circumstance beyond the dealer’s control, adds its own temporal qualifying language to the statute, renders the cure provision in the statute meaningless, and favors the manufacturer, Interstate, over the dealer, River Valley, whose interests the legislature was seeking to protect.

I.

I agree with the majority that the second paragraph of section 2.2.1 of the dealership agreement does not require River Valley to represent an OEM that offers Detroit Diesel engines. This paragraph provides:

If Dealer represents an OEM, Dealer shall promote the sale, and maintain in stock an appropriate number, of such OEM products equipped with Products.

Representation of an OEM is expressed as a condition in this paragraph, not as an absolute requirement. Because River Valley no longer represents an OEM, the conditional requirement of promoting the sale of OEM products equipped with Detroit Diesel engines has no application to River Valley.

I disagree, however, with the majority’s interpretation of the first paragraph of section 2.2.1, which provides:

Dealer shall actively and effectively promote the sale of Products and Parts to owners and users of Products and to other potential customers located in Dealer’s Area of Responsibility. Dealer shall also advertise and promote its Dealer Operations and shall participate in sales, service and parts promotional programs recommended by Distributor and shall utilize and display reasonable quantities of literature and materials promoting Products and Parts. Examining this paragraph “separately,” the majority concludes that River Valley cannot fulfill the intent of this paragraph without representing an OEM that offers Detroit Diesel engines. The majority’s interpretation effectively requires River Valley to represent an OEM so that it can promote the sale of new trucks equipped with Detroit Diesel engines, even though it acknowledges that other language in this same section that actually addresses a dealer’s representation of an OEM is merely conditional and “cannot reasonably be read as a requirement that the dealer represent an OEM.”

The majority’s construction of section 2.2.1 cannot be reconciled and violates basic rules of contract construction. “The cardinal purpose of construing a contract is to give effect to the intention of the parties as expressed in the language they used in drafting the whole contract.” Art Goebel, Inc. v. N. Suburban Agencies, Inc., 567 N.W.2d 511, 515 (Minn.1997). “We construe a contract as a whole and attempt to harmonize all clauses of the contract.” Chergosky v. Crosstown Bell, Inc., 463 N.W.2d 522, 525 (Minn.1990). Phrases and sentences cannot be dissected and read separately and “out of context with the entire agreement.” Metro Office Parks Co. v. Control Data Corp., 295 Minn. 348, 352, 205 N.W.2d 121, 124 (1973). “Because of the presumption that the parties intended the language used to have effect, we will attempt to avoid an interpretation of the contract that would render a provision meaningless.” Chergosky, 463 N.W.2d at 526; see also Current Tech. Concepts, Inc. v. Irie Enters., Inc., 530 N.W.2d 539, 543 (Minn.1995) (“A contract must be interpreted in a way that gives all of its provisions meaning.”).

By using the conditional “if’ language in the second paragraph of section 2.2.1 — “If Dealer represents an OEM” — it seems clear that Interstate contemplated that there would be Detroit Diesel dealers that represent an OEM and Detroit Diesel dealers that do not represent an OEM. Consequently, by making the sales and promotion responsibilities in the first paragraph applicable to all dealers, not just those dealers that represent an OEM, Interstate must have intended that dealers could fulfill those responsibilities without representing an OEM. In fact, Interstate’s president testified at his deposition that he was not aware of any specific reason that River Valley could not continue to actively and effectively promote the sale of Detroit Diesel parts and replacement engines, either new or remanufactured, to current owners and users of Detroit Diesel engines. The “primary intent” of the dealership agreement, as stated in the agreement itself, is “to provide Product users with convenient and quality sales and service availability.” River Valley can fulfill this intent without representing an OEM that offers Detroit Diesel engines. River Valley can still sell Detroit Diesel parts and replacement engines to owners of trucks with Detroit Diesel engines, and River Valley can still perform warranty and other service work on trucks equipped with Detroit Diesel engines. Although River Valley can no longer promote the sale of new International trucks equipped with Detroit Diesel engines, the majority appears to acknowledge that these responsibilities, which are specifically described in the second paragraph of section 2.2.1, “fall out of the agreement! ] if the dealer does not represent an OEM that offers Detroit Diesel engines,” and the majority appears to agree that these responsibilities “no longer apply to River Valley.”

The majority makes no attempt to reconcile its conclusions that the first paragraph of section 2.2.1 requires dealers to represent an OEM and promote the sale of OEM products equipped with Detroit Diesel engines while the second paragraph— the paragraph that specifically addresses the representation of OEMs and the promotion of OEM products — does not. The majority tries to dodge the conflict by finding that “the parties intended the two paragraphs of section 2.2.1 to be independent of each other.” The two paragraphs may impose independent duties, but that is beside the point. The majority offers no explanation why the dealership agreement would contain two sets of duties — one set of “absolute contractual duties” under the first paragraph that apply to all dealers and one set of “conditional contractual duties” under the second paragraph that apply only to those dealers that represent an OEM — if the dealership agreement effectively requires all dealers to represent an OEM.

Further, the majority interprets the dealership agreement to provide that a dealer is in breach of the agreement any time the condition of representing an OEM is not met. The majority’s construction turns the failure to satisfy a conditional obligation into a breach of the agreement. Such an interpretation violates simple, established principles of contract construction. See 17A Am.Jur.2d Contracts § 459 (2004) (stating that the “nonoccurrence of a condition” is generally not a breach); Richard A. Lord, Williston on Contracts § 38:5 (4th ed.2000) (explaining the distinction between promises and conditions).

If Interstate actually had intended to require all dealers to represent an OEM, Interstate would not have offered a dealership agreement containing the conditional “if’ language, and the dealership agreement would not contain “conditional” duties relating to the sale and promotion of OEM products, which apply only to those dealers that represent an OEM. If “the sale of new trucks with Detroit Diesel engines is the life blood” of Interstate’s business, as the majority seems to have accepted, Interstate should have included it as a requirement in the dealership agreement. We are required to determine the meaning of “what is written in the instrument, not what was intended to be written.” Carl Bolander & Sons, Inc. v. United Stockyards Corp., 298 Minn. 428, 433, 215 N.W.2d 473, 476 (1974).

By examining the language in the first paragraph of section 2.2.1 “separately,” the majority improperly dissects the first paragraph from the rest of the agreement. By interpreting the agreement as requiring all dealers to represent an OEM and requiring all dealers to promote the sale of OEM products, the majority renders the second paragraph of section 2.2.1 meaningless. There is no longer a condition or a conditional obligation relating to OEM representation and OEM sales — only a requirement and an absolute obligation. See Telex Corp. v. Data Prods. Corp., 271 Minn. 288, 293, 135 N.W.2d 681, 685 (1965) (noting that “[i]t is an elementary principle of law that a contract must be construed as a whole,” and “[t]he intention of the parties must be gathered from the entire instrument and not from isolated clauses”) (quotation omitted).

Even accepting the majority’s determination that “River Valley’s inability to sell new trucks with Detroit Diesel engines prevents it from ‘actively and effectively’ promoting the sale of such engines,” there is, at best, a conflict or ambiguity in the agreement, because the second paragraph only requires the dealer to promote the sale of OEM products equipped with Detroit Diesel engines if the dealer represents an OEM. Either way, the dealership agreement cannot reasonably be interpreted as requiring River Valley to represent an OEM.

When there is an apparent conflict in contract provisions, “contract construction compels us to determine that the more specific language takes precedence over the more general language.” Bank Midwest, Minn., Iowa, N.A. v. Lipetzky, 674 N.W.2d 176,181 n. 8 (Minn.2004). We also have noted “the well-established rule of construction that when a contract is open to two conflicting interpretations, the one more favorable to the party who did not draft the instrument should be adopted.” ICC Leasing Corp. v. Midwestern Mach. Co., 257 N.W.2d 551, 555 (Minn.1977). In this case, the agreement was Interstate’s, not River Valley’s. Therefore, the court must construe the agreement in favor of River Valley, and the court must give precedence to the second paragraph of section 2.2.1, which treats a dealer’s representation of an OEM as a condition and treats the sale and promotion of OEM products as a conditional responsibility.

The same result is reached if the dealership agreement contains ambiguous language. See Art Goebel, Inc., 567 N.W.2d at 515 (explaining that “[a] contract is ambiguous if, based upon its language alone, it is reasonably susceptible of more than one interpretation”). Although the interpretation of an ambiguous contract is ordinarily a question of fact for the jury, Denelsbeck v. Wells Fargo & Co., 666 N.W.2d 339, 346 (Minn.2003), in this case, the parties agreed that the district court could decide the issues summarily on the facts presented, without the need for a trial. Therefore, the court must construe any ambiguity in the contract language regarding the representation of an OEM and the promotion of the sale of OEM products in favor of River Valley. See Hilligoss v. Cargill, Inc., 649 N.W.2d 142, 148 (Minn.2002) (stating that “ambiguous contract terms must be construed against the drafter”).

I cannot interpret the dealership agreement to impose a requirement, let alone an essential requirement, on River Valley to promote the sale of OEM products when the agreement specifically uses conditional, not absolute, language with regard to that requirement. Accordingly, I conclude that Interstate has not established that River Valley failed to substantially comply with an essential requirement in the dealership agreement, and Interstate did not have “good cause” under HUEMDA to terminate the dealership agreements.

II.

I also disagree with the majority’s determination that Interstate can base its decision to terminate River Valley’s dealership agreements on International’s decision to stop offering Detroit Diesel engines where it is undisputed that River Valley had no control over International’s decision. Interstate has stipulated that it “made a decision not to renew International truck dealers as overhaul dealers after the end of 2002” “[a]s a result of International’s decision to drop the Detroit Diesel engine as an option on all new International trucks.” There is no evidence that River Valley played any role in International’s decision to discontinue offering Detroit Diesel engines. In fact, Interstate admits that many International dealers, including River Valley, unsuccessfully tried to persuade International to reverse its decision.

HUEMDA provides that an equipment manufacturer such as Interstate cannot “attempt or threaten to terminate” a “dealership agreement if the attempt or threat is based on the results of a natural disaster, a labor dispute, or other circumstance beyond the dealer’s control.” Minn.Stat. § 325E.0682(b)(4) (2004). HUEMDA also provides that the manufacturer’s notice of termination, cancellation, or nonrenewal of the dealership agreement “must provide that the dealer has until expiration of the notice period in which to cure a claimed deficiency.” Minn.Stat. § 325E.0681, subd. 2 (2004). “If the deficiency is rectified within the notice period, the notice is void.” Id.

The majority does not dispute that the actions of International that led to the termination of River Valley’s dealership agreements were outside the control of River Valley; however, the majority nonetheless concludes that International’s actions do not constitute a “circumstance beyond the dealer’s control” within the meaning of Minn.Stat. § 325E.0682(b)(4). To reach this conclusion, the majority interprets the statutory language “circumstance beyond the dealer’s control” to encompass only temporary circumstances and not “cireumstance[s] of a permanent or indefinite duration.” This interpretation has no support whatsoever in the plain language of the statute, the statutory scheme, or the purpose of HUEMDA.

“The object of all interpretation and construction of laws is to ascertain and effectuate the intention of the legislature.” Minn.Stat. § 645.16 (2004). If the legislature had intended to limit the “circumstances” in section 325E.0682(b)(4) to temporary circumstances, it easily could have included language to that effect. The legislature did not, and the rules of statutory construction forbid us from adding words to a statute. Genin v.1996 Mercury Marquis, 622 N.W.2d 114, 119 (Minn.2001). Further, this language is unworkable as a practical matter, because it often will be difficult to determine if the circumstance that threatens a dealership agreement involves only a “temporary inability to perform” or an indefinite or permanent inability to perform.

The majority’s interpretation of section 325E.0682(b)(4) also is inconsistent with the statutory scheme. If the reason for the manufacturer’s action relates to a circumstance beyond the dealer’s control— whether temporary or permanent — the dealer will have no meaningful opportunity to cure the claimed deficiency. This would render the cure provision “meaningless, in violation of the canon of statutory construction that each provision in a statute is to be given meaning.” MBNA Am. Bank, N.A. v. Comm’r of Revenue, 694 N.W.2d 778, 780 (Minn.2005); see Minn.Stat. § 645.16 (2004). In addition, the majority’s narrow construction of “circumstance beyond the dealer’s control” in section 325E.0682(b)(4) subverts the remedial “purpose of HUEMDA,” which is “to protect the dealer.” Astleford Equip. Co. v. Navistar Int’l Transp. Corp., 632 N.W.2d 182, 191 (Minn.2001) (noting that HUEM-DA was enacted to provide protection to heavy and utility equipment dealers with regard to their dealership agreements with heavy and utility equipment manufacturers, who have inherently superior economic power in the negotiation of dealership agreements).

The majority’s interpretation of HUEMDA relies heavily on the Wisconsin Supreme Court’s interpretation of the Wisconsin Fair Dealership Law. Like HUEMDA, the Wisconsin Fair Dealership Law requires “good cause” to terminate a dealership agreement. However, the majority fails to mention that the Minnesota statute is materially different from the Wisconsin statute in terms of defining “good cause.” Compare Minn.Stat. § 325E.0681, subd. 1, with Wis. Stat. § 135.02(4) (2004). The Wisconsin Fair Dealership Law measures good cause “by the dealer’s substantial compliance with requirements ‘imposed’ or ‘sought to be imposed by the grantor.’ ” Ziegler Co. v. Rexnord, Inc., 147 Wis.2d 308, 433 N.W.2d 8, 12 (1988) (quoting Wis. Stat. § 135.02(4)(a)). As the Wisconsin Supreme Court observed, “[t]he phrase ‘sought to be imposed’ suggests legislative recognition that the grantor has some ability to change the dealership — some right on the part of the grantor to change its method of doing business with its dealers.” Ziegler, 433 N.W.2d at 12. As the majority notes, Ziegler was decided one year before HUEMDA took effect in Minnesota, yet the Minnesota legislature chose not to pattern its definition of good cause on the Wisconsin statute. Instead, the legislature defined good cause as the dealer’s failure “to substantially comply with essential and reasonable requirements imposed upon the dealer by the dealership agreement,” without specifically recognizing the right of the equipment manufacturer to change dealership requirements. Minn.Stat. § 325E.0681, subd. 1.

In addition, the majority concludes that River Valley could comply with the dealership agreement by discontinuing its representation of International or by representing another OEM that offers Detroit Diesel engines. To begin with, although the court of appeals somehow came to the conclusion that “River Valley could comply with paragraph 2.2.1 by no longer representing International,” River Valley Truck Ctr., Inc. v. Interstate Cos., Inc., 680 N.W.2d 99, 105 (Minn.App.2004), Interstate never gave River Valley the option of discontinuing its relationship with International. Rather, Interstate informed River Valley that to avoid termination, it needed to “establish! ] a relationship with another OEM that sells DDC engines as part of its Product offering.” Further, discontinuing the relationship with International would not enable River Valley to satisfy the purported contractual “requirement” of selling new trucks equipped with Detroit Diesel engines. Even if Interstate had attempted to impose this condition, it would violate HUEMDA. See Minn.Stat. § 325E.0682(b)(2) (2004) (stating that it is a violation of HUEMDA for an equipment manufacturer to “coerce an equipment dealer into a refusal to purchase the equipment manufactured by another equipment manufacturer”). I also fail to see how interpreting HUEMDA to permit a manufacturer to terminate a dealership agreement because the dealer does not take an action that will immediately destroy its business — in this case, requiring an International truck dealer to no longer be an International truck dealer — serves the purpose of affording “ ‘the dealership the opportunity to react and protect itself.’ ” Astleford, 632 N.W.2d at 190 (quoting Jungbluth v. Hometown, Inc., 201 Wis.2d 320, 548 N.W.2d 519, 524 (1996)).

As for the option of representing another OEM that offers Detroit Diesel engines, the majority states that “even though River Valley could not control International, it did have the theoretical ability to return to compliance with the dealer agreements by securing another OEM.” The majority ignores the undisputed fact that securing another OEM was a practical impossibility for River Valley in the less than 90-day time frame that Interstate provided. In unimpeached and unrebutted affidavit testimony, the CEO of River Valley stated that River Valley attempted to obtain a second heavy-duty truck dealership that offered Detroit Diesel engines in new trucks, but no OEM was willing to appoint River Valley as a dealer. River Valley even attempted to obtain a dealership with an OEM that manufactures equipment incorporating Detroit Diesel engines, but no dealerships were available. Just as River Valley could not control International, it could not control other manufacturers. Therefore, compliance with the dealership agreement was not within River Valley’s control where the opportunity to cure the claimed deficiency was not within River Valley’s control.

The majority has distorted the language of the dealership agreement and the language of HUEMDA to reach the result that Interstate had “good cause” to terminate the dealership agreement. Perhaps this result makes sense from a policy perspective. However, it is not our role in this case to make policy. In enacting HUEMDA to protect dealers, the legislature already has weighed the policy considerations. In this case, our role is limited to basic contract construction and statutory interpretation. If the legislature believes that the result dictated by the contract and the statute in this case is not the right result, then the legislature can amend the statute accordingly and make it more like Wisconsin’s Fair Dealership Law. It is not for this court to incorporate a requirement into the dealership agreement that is stated merely as a condition or to add language to a statute to reach what the court believes is the best result. For these reasons, I would reverse the courts below and reinstate River Valley’s claims.

BLATZ, C.J.

(dissenting).

I join in the dissent of Justice Russell A. Anderson.

PAGE, J.

(dissenting).

I join in the dissent of Justice Russell A. Anderson.

      . HUEMDA was enacted in 1989 to provide protection to heavy and utility equipment dealers with regard to their dealership agreements with heavy and utility equipment manufacturers, who have inherently superior economic power when negotiating dealership agreements. Astleford Equip. Co. v. Navistar Int’l Transp. Corp., 632 N.W.2d 182, 191 (Minn.2001); Act of May 26, 1989, ch. 267, §§ 1-6, 1989 Minn. Laws 907, 907-10. Interstate does not dispute the applicability of HUEMDA. For purposes of HUEMDA, the terms "heavy and utility equipment,” "heavy equipment,” or "equipment” mean "equipment and parts for equipment including but not limited to * * * trucks and truck parts.” Minn.Stat.. § 325E.068, subd. 2(2) (2004); see also Minn.Stat. § 325E.068, subds. 6 & 7 (2004) (defining "truck” and “truck parts”).

      . Interstate’s initial notice of nonrenewal, dated November 18, 2002, did not provide 90 days' prior written notice of the nonrenewal and did not "provide that the dealer has until expiration of the notice period in which to cure a claimed deficiency,” as required by HUEMDA under these circumstances. See Minn.Stat. § 325E.0681, subd. 2. In a subsequent letter from Interstate's counsel, Interstate extended the termination date to February 20, 2003.

      . The record of the parties’ agreements is not completely clear as to whether the court was to use a summary judgment standard (no genuine issues of material fact) or to weigh the evidence and make findings of disputed facts. Because the record does not clearly authorize the district court to resolve disputed fact issues on the basis of the written submissions, we will view the parties’ agreements as authorizing the court to treat their motions as cross-motions for summary judgment.

      . In addition, HUEMDA enumerates eight specific circumstances involving the dealer, which also may establish good cause, including (1) significant changes in the ownership structure of the dealer without the manufacturer's consent; (2) bankruptcy; (3) change in the dealer's location without the approval of the manufacturer; (4) default on security agreements with the manufacturer; (5) failure to operate for seven consecutive days; (6) conviction affecting the dealer's relationship with the manufacturer; (7) conduct that is injurious to customers or the general public; and (8) consistent failure to meet market penetration requirements. Minn.Stat. § 325E.0681, subd. l(a)-(h). None of these circumstances is involved here.

      . As Interstate points out, distributors such as Interstate perform the majority of service on Detroit Diesel engines. Thus, while River Valley did Detroit Diesel warranty work totaling $70,000 in 2002, warranty work for all Interstate locations totaled $15 million. Interstate naturally depends on the ongoing sales of trucks with Detroit Diesel engines for its future service business.

      . As an example of the incapacitating effect that International's requirements would necessarily have on River Valley, Interstate provided evidence that on March 27, 2002, River Valley joined representatives of International and Cummins in a meeting with the owner of Schugel Trucking Company, River Valley's largest customer. The purpose of the meeting was to persuade Schugel to buy International trucks with Cummins engines. Following the meeting, Schugel ordered 65 International trucks with Cummins engines from River Valley.

      . The provision in section 2.2.1 is not an isolated reference to a dealer’s representation of an OEM. Other provisions of the agreement similarly use the conditional "if” language. For example, in addressing the training responsibilities of a Detroit Diesel dealer, the agreement states: "If Dealer represents an OEM, Dealer shall employ a sales force adequately trained regarding the essential sales features and application guidelines of Products used in OEM’s Products.” (Emphasis added.)

      . For example, Interstate stipulated that Detroit Diesel “has never taken steps to prevent or discourage an on-highway Detroit Diesel distributor from selling Detroit Diesel engines (new or remanufactured) or replacement parts to a dealer for resale to owners and users of trucks equipped with Detroit Diesel engines but not produced or sold by the OEM(s) that the dealer represents.” Consequently, River Valley’s sales of Detroit Diesel engines are not necessarily restricted to International customers.

      . As evidence of "the incapacitating effect” of International’s decision, the majority cites a March 27, 2002, sales meeting, where representatives of River Valley, International, and Cummins met with the owner of Schugel Trucking Company, and Schugel subsequently ordered 65 International trucks with Cum-mins engines from River Valley. However, faced with International’s decision to stop offering Detroit Diesel engines as an option in new trucks, River Valley had no choice but to sell trucks with engines by other manufacturers, as River Valley had done for years— including trucks sold to Schugel — with no complaints from Interstate. Although Interstate contends that the sale of new trucks is "critical to River Valley's right to maintain its International dealership,” Interstate did not even collect data regarding dealers’ sales of new trucks equipped with Detroit Diesel engines and before 2001 had never terminated a dealership agreement based on the dealer’s failure to sell an adequate number of trucks equipped with Detroit Diesel engines. Moreover, Interstate acknowledges that there are "many other” Detroit Diesel dealers in the southern Minnesota market. The next year, Schugel purchased 65 Freightliner trucks with Detroit Diesel engines.

      . The "notice and right to cure provisions" do not apply if the reason for the termination, cancellation, or nonrenewal is for any reason set forth in section 325E.0681, subd. l(a)-(g). Minn.Stat. § 325E.0681, subd. 2. The majority agrees that "[n]one of these circumstances are involved here.” This provision demonstrates that the legislature knew how to limit the applicability of the cure provision. See Minn.Stat. § 645.19 (2004) ("Exceptions expressed in a law shall be construed to exclude all others.”).

      . Interstate's initial notice of nonrenewal, dated November 18, 2002, did not provide 90 days’ prior written notice of the nonrenewal and did not "provide that the dealer has until expiration of the notice period in which to cure a claimed deficiency,” as required by HUEMDA under these circumstances. See Minn.Stat. § 325E.0681, subd. 2 (2004). In a subsequent letter from Interstate's counsel, dated December 10, 2002, Interstate extended the termination date to February 20, 2003, and indicated that “River Valley can cure its breach by establishing a relationship with another [original equipment manufacturer] that sells [Detroit Diesel] engines as part of its Product offerings.”


source: Caselaw Access Project

author: /s/Sam Hanson Associate Justice

license: Public Domain

text:
    Jon DEINES, Respondent, v. CUSTOM LOG BUILDINGS/Uninsured, Respondent, and Black Bear Homes, Inc./Acuity Mutual Insurance Company, Relators, and SMDC Health System, Intervenor, and Special Compensation Fund.
    No. A05-1316.
    Supreme Court of Minnesota.
    Sept. 29, 2005.

      Charles E. Gillin, Thomas L. Cummings, Jardine, Logan <& O’Brien, P.L.L.P., Lake Elmo, MN, for Employer/Insurer-Rela-tors.
    James W. Haskell, Haskell Law Firm, P.L.L.P., Bemidji, MN, for Employer-Respondent.
    David R. Vail, Soderberg & Vail, L.L.C., Minneapolis, MN, for Employee-Respondent.
    Wendy Schwartz, SMDC Health System, Duluth, MN, for Intervenor.
    Mike Hatch, Attorney General, Rory H. Foley, Assistant Attorney General, St. Paul, MN, for Special Compensation Fund.
   ORDER

Based upon all the files, records and proceedings herein,

IT IS HEREBY ORDERED that the decision of the Workers’ Compensation Court of Appeals filed June 6, 2005, be, and the same is, affirmed without opinion. See Hoff v. Kempton, 317 N.W.2d 361, 366 (Minn.1982) (summary dispositions have no precedential value because they do not commit the court to any particular point of view, doing no more than establishing the law of the case).

Employee is awarded $1,200 in attorney fees.

BY THE COURT:

/s/Sam Hanson

Associate Justice

ANDERSON, RUSSELL A, J., took no part in the consideration or decision of this case.


author: KLAPHAKE, Judge.

text:
    STATE of Minnesota, Appellant, v. Bruce Peter BREN, Respondent.
    No. A05-812.
    Court of Appeals of Minnesota.
    Sept. 20, 2005.

      Mike Hatch, Attorney General, St. Paul, MN; and Amy Klobuchar, Hennepin County Attorney, Patrick C. Diamond, Assistant County Attorney, Minneapolis, MN, for appellant.
    Peter B. Wold, Aaron J. Morrison, Peter B. Wold, P.A., Minneapolis, MN, for respondent.
    Considered and decided by KLAPHAKE, Presiding Judge, LANSING, Judge, and DIETZEN, Judge.
   OPINION

KLAPHAKE, Judge.

The State of Minnesota brings this pretrial appeal from an order declaring a provision of the mechanics’ lien statute unconstitutional and dismissing eight counts of a 19-count complaint that charged respondent Bruce Peter Bren with violating that statute. See Minn. Const, art. I, § 12 (prohibiting imprisonment for nonpayment of debt absent fraud); Minn.Stat. § 514.02 (2000) (providing civil and criminal penalties for failure to use proceeds paid for improvement to real estate). By order dated May 17, 2005, this court denied respondent’s motion to dismiss this appeal. State v. Bren, A05-812 (MinmApp. May 17, 2005) (determining that “Respondent has not shown that the ‘summary statement’ requirement [of Minn. R.Crim. P. 28.04, subd. 2(2)] is jurisdictional, or that the state has failed to make a ‘threshold showing’ of critical impact”).

On appeal, the state argues that Minn. Stat. § 514.02 is constitutional because it does not imprison for the nonpayment of a debt, but criminalizes the violation of a statutorily created trust-like relationship between a contractor and a homeowner. Respondent counters that because the 2000 statutory amendments specifically removed fiduciary liability as an element, the statute is now unconstitutional because it no longer meets the requirements of State v. Reps, 302 Minn. 38, 223 N.W.2d 780 (1974).

Because the 2000 amendments to Minn. Stat. § 514.02 merely disclaim certain civil liabilities or remedies, but do not change the basic elements of the crime involved and found constitutional in Reps, we conclude that the statute remains constitutional. We therefore reverse and remand.

FACTS

On January 22, 2004, the state charged respondent in a 19-count complaint with multiple counts of unlawful failure to use proceeds paid for the improvement to real estate over $2,500, Minn. Stat § 514.02 (2000); theft by swindle over $35,000, Minn.Stat. § 609.52(2)(4) (2000); theft by false representation over $35,000, Minn. Stat. § 609.52(2)(3)(i) (2000); and fraud in obtaining credit over $2,500, Minn.Stat. § 609.82(2) (2000). The complaint alleges that between 1999 and 2002, respondent engaged in multiple acts of fraud while he was president of Bruce Bren Homes, a now-bankrupt home construction company. The complaint alleges that as a result of respondent’s “swindle, scores of homeowners, subcontractors, and other victims lost over $2,000,000 through various fraudulent schemes that induced victims to make progress payments, provide materials and/or labor, extend credit, and waive financial rights.”

Counts 2, 6, 8, 10, 12, 14, 16, and 18 allege violations of Minn.Stat. § 514.02, and detail eight separate home construction projects in which homeowners entrusted respondent with funds to pay subcontractors and material suppliers. The complaint alleges that respondent failed to turn these moneys over to the subcontractors and material suppliers who were entitled to payment. The complaint further alleges that respondent continued to live an extravagant lifestyle and use company funds to pay substantial personal debts. The complaint finally alleges that homeowners were eventually forced to pay the subcontractors and material suppliers directly for their work in order to have their property titles cleared of mechanics’ liens.

Respondent moved to dismiss the eight counts of the complaint based on Minn. Stat. § 514.02, which he argued was unconstitutional under Minn. Const, art. I, § 12. The state appeals from the district court’s grant of respondent’s motion.

ISSUES

1. Did the district court err in determining that Minn.Stat. § 514.02 (2000) is unconstitutional because it allows the imprisonment of debtors without any showing of fraud?

2. Need we address respondent’s alternative argument that Minn.Stat. § 514.02 (2000) is unconstitutionally vague and overbroad where respondent failed to raise the issue by notice of review?

ANALYSIS

The constitutionality of a statute presents a question of law that this court reviews de novo. State v. Wright, 588 N.W.2d 166, 168 (Minn.App.1998), review denied (Minn. Feb. 24, 1999). “In evaluating constitutional challenges, the interpretation of statutes is a question of law.” State v. Manning, 532 N.W.2d 244, 247 (Minn.App.1995), review denied (Minn. July 20,1995).

A Minnesota court will declare a statute unconstitutional only when “absolutely necessary and with extreme caution.” Miller Brewing Co. v. State, 284 N.W.2d 353, 356 (Minn.1979). “Every presumption is invoked in favor of the constitutionality of a statute.” Id. The party challenging the constitutionality of a statute must demonstrate “beyond a reasonable doubt that the statute violates some constitutional provision.” Id.

In State v. Koenig, 666 N.W.2d 366, 372-73 (Minn.2003), the supreme court set out the rules for construction of a criminal statute:

The object of statutory interpretation is to effectuate the intent of the legislature. The rules of statutory construction require that a statute’s words and phrases are to be given their plain and ordinary meaning. When the language of a statute is ambiguous, the intent of the legislature controls. When reviewing a statute, we assume that the legislature does not intend to violate the United States and Minnesota Constitutions or intend absurd or unreasonable results. Penal statutes are to be construed strictly so that all reasonable doubt concerning legislative intent is resolved in favor of the defendant. However, strict construction does not require that we assign the narrowest possible interpretation to the statute.

(Citations omitted.)

I.

The Minnesota Constitution prohibits imprisonment for debt as follows:

No person shall be imprisoned for debt in this state, but this shall not prevent the legislature from providing for imprisonment, or holding to bail, persons charged with fraud in contracting said debt.

Minn. Const, art. I, § 12.

In 1887, the Minnesota Legislature enacted a statute to punish unscrupulous contractors. 1887 Minn. Laws ch. 170, § 3. The supreme court, however, found that this statute violated the constitutional prohibition against imprisonment for debt because it was “not necessary that a contractor be guilty of any fraud or other tort in order to subject him to the penalties of this section.” Meyer v. Berlandi, 39 Minn. 438, 441, 40 N.W. 513, 514 (1888).

In 1915, the statute was amended to punish any contractor “who, with intent to defraud” used proceeds of a payment made to a homeowner for “any other purpose than the payment for labor [or] materials.” 1915 Minn. Laws ch. 105, § 1. The supreme court upheld this version of the statute as constitutional, reasoning that “the purpose of the statute is not to imprison for debt, but to punish the fraud.” State v. Harris, 134 Minn. 35, 38, 158 N.W. 829, 830 (1916) (“No honest man can possibly be injured by the provisions of the act of 1915. Only the contractor who diverts money with the evil intent to defraud need fear the law.”).

In 1971, the legislature removed the “intent to defraud” language that had been added in 1915 and amended the statute to read:

Whoever, on any improvement to real estate ... fails to use the proceeds of any payment made to him on account of such improvement ... knowing that the cost of any such labor performed [or] material ... furnished for such improvement remains unpaid, and who has not furnished to the person making such payment either a valid lien waiver as to any unpaid labor performed ... or a payment bond in the basic amount of the contract price for such improvement ... shall be guilty of theft of the proceeds of such payment[.]

1971 Minn. Laws ch. 914, § 1. The supreme court determined that the statute remained constitutional, even though the amended version removed the element of intent to defraud. State v. Reps, 302 Minn. 38, 46, 223 N.W.2d 780, 785-86 (1974). In particular, the court reasoned:

A reasonable and practical construction of these provisions is that the contractor, unless he has furnish[ed] a lien waiver or payment bond, accepts payment for the improvement in a fiduciary capacity. This imposes a trust character on the payments, and it is a knowing violation of that trust, rather than a failure to pay a debt, which the statute makes punishable.

Id. at 46, 223 N.W.2d at 786. Both parties agree that Reps remains the controlling precedent.

In 1998, this court ruled that Minn.Stat. § 514.02 provided only criminal penalties and did not create a civil cause of action. Energy & Air Sys., Inc. v. Kuettel, 580 N.W.2d 62, 63 (Minn.App.1998), review denied (Minn. Aug. 31, 1998). In 2000, the legislature again amended MinmStat. § 514.02 by adding subdivision la, which provides a limited civil remedy, and substantially rewriting subdivision 1.2000 Minn. Laws ch. 430, § 1.

Of particular importance to this appeal, subdivision 1 now reads:

Subdivision 1. Proceeds of payments; acts constituting theft, (a) Proceeds of payments received by a person contributing to an improvement to real estate within the meaning of 514.01 shall be held in trust by that person for the benefit of those persons who furnished labor, skill, material, or machinery contributing to the improvement. Proceeds of the payment are not subject to garnishment, execution, levy, or attachment. Nothing contained in this subdivision shall require money to be placed in a separate account and not commingled with other money of the person receiving payment or create a fiduciary liability or tort liability on the part of any person receiving payment or entitle any person to an award of punitive damages among persons contributing to an improvement to real estate under section 514.01 for a violation of this subdivision. (b) If a person fails to use the proceeds of a payment made to that person for the improvement, for the payment for labor, skill, material, and machinery contributed to the improvement, knowing that the cost of the labor performed, or skill, material, or machinery furnished remains unpaid, and who has not furnished to the person making such payment either a valid lien waiver under section 514.07, or a payment bond in the basic amount of the contract price for the improvement, conditioned for the prompt payment to any person entitled thereto for the performance of labor or the furnishing of skill, material, or machinery for the improvement, shall be guilty of theft of the proceeds of the payment and is punishable under section 609.52. For an improvement to residential real estate made by a person licensed, or who should be licensed, under section 326.84, a shareholder, officer, director, or agent of a corporation, who is responsible for the theft shall be guilty of theft of the proceeds.

Minn.Stat. § 514.02, subd. 1 (emphasis added).

Respondent claims that the language emphasized above in subdivision 1(a) renders the statute unconstitutional under Reps because it negates the creation of any “fiduciary liability.” Respondent reasons that, even though subdivision 1(a) still purports to create a trust in its first sentence, the language of the third sentence “defeats any possible creation of a trust capable of conferring fiduciary liability.” Respondent insists that the statutory language thus “creates a contradiction that destroys its purpose.”

The district court agreed, stating:

While the statutory language says the proceeds are held in trust, the same provision states that no fiduciary liability is created. A fiduciary relationship is the cornerstone of a trust, one cannot exist without the other at least where criminal liability is concerned.
The Legislature may not call something a trust in one sentence, while eliminating fiduciary liabilities in another sentence of the same statute. One cancels the other and cannot be reconciled in a criminal context. They may, of course, be reconciled in a civil context as was done in Duluth Erections
Thus, we return full circle; this is collection of a debt. The Constitution prohibits imprisonment for debt, absent fraud in contracting such debt.

(Footnote added.) The construction given the statute by respondent and the district court thus presumes that elimination of “fiduciary liability” renders the earlier “held in trust” language meaningless. We, however, choose to construe the statute so as to “give effect to all its provisions.” Minn.Stat. § 645.16 (2004). We further choose to assume that the legislature did not intend to violate the constitution or to reach an absurd or unreasonable result. See Koenig, 666 N.W.2d at 372-73.

We therefore conclude that by adding the language “held in trust,” the 2000 legislature intended to incorporate the implied trust-like character discussed in Reps. The supreme court in Reps found the 1971 version of Minn.Stat. § 514.02 constitutional, not because it included explicit language creating a trust, but because its provisions punished one who received payments for an improvement knowing that the improvement remained unpaid, but who nevertheless failed to (1) use the proceeds for the payment of the improvement; (2) furnish the person making the payment with a valid lien waiver; or (3) provide the person with a payment bond. Reps, 302 Minn, at 46, 223 N.W.2d at 785-86. The court in Reps reasoned that

[a] reasonable and practical construction of these provisions is that the contractor, unless he has furnish[ed] a lien waiver or payment bond, accepts payment for the improvement in a fiduciary capacity. This imposes a trust character on the payments, and it is a knowing violation of that trust, rather than a failure to pay a debt, which the statute makes punishable.

Id.

Because the provisions considered crucial in Reps remain in the 2000 version of the statute, we conclude that the statute remains constitutional. As in Reps, it is the contractor’s knowing violation of the “trust character” of the payments entrusted to him by the homeowner, rather than any failure to pay a debt to the subcontractor, that makes the contractor criminally liable under the statute. The statute punishes the contractor’s misapplication of payments received from the homeowner, as opposed to punishing the failure to pay a debt owed to subcontractors. Cf. Wojahn v. Halter, 229 Minn. 374, 380-81, 39 N.W.2d 545, 548-49 (1949) (noting that term “debt” as used in constitutional prohibition against imprisonment for debt is limited to obligations to pay money or something due and owing from one to another arising out of contract, and does not prohibit imprisonment for violation of other obligations such as failure to pay alimony or child support, or for failure to deliver specific property or otherwise comply with court order).

By so construing Minn.Stat. § 514.02, we conclude that the language in subdivision 1(a) eliminating or negating fiduciary liability necessarily applies only to the limited civil cause of action created by the statute in subdivision la. While we do not find the statute to be ambiguous, we note that our construction is fully supported by the legislative history, which establishes that the elimination of fiduciary liability was intended to apply to the newly created civil remedy. The language eliminating fiduciary and tort liability was taken from paragraph 9.6.7 of the American Institute of Architects (ALA) general conditions of contract for construction, and defines the contractual remedies between the contractor and subcontractor. Respondent does not dispute the existence or meaning of this legislative history, but merely insists that the “legislative record, no matter how clear, does not trump the rule of [lenity] and salvage this statute.” But, because there is no doubt concerning the intent of the legislature here, the rule of lenity does not require us to construe the statute so strictly as to find it unconstitutional. See Koenig, 666 N.W.2d at 372-73 (stating that “[pjenal statutes are to be construed strictly so that all reasonable doubt concerning legislative intent is resolved in favor of the defendant,” but that “strict construction does not require that we assign the narrowest possible interpretation to the statute”).

II.

Respondent alternatively argues that the statute is unconstitutional because it is void for vagueness and over-broad. The district court rejected these challenges, stating “[i]f constitutional, the statute is clear that failure to pay subcontractors with knowledge these sums are unpaid is a crime. It is not vague nor does it violate notions of due process.”

Respondent has not filed a notice of review to challenge the district court’s ruling on this issue. See Minn. R. Civ.App. P. 106 (requiring respondent to file notice of review); Minn. R.Crim. P. 28.04, subd. 3 (allowing defendant seeking review of adverse ruling in state’s pretrial appeal to file cross-appeal). Thus, we need not address this issue on appeal and decline to do so. See Arndt v. Am. Fam. Ins. Co., 394 N.W.2d 791, 793 (Minn.1986) (rejecting respondent’s claim that it was not required to file notice of review because judgment was entirely in its favor).

DECISION

The district court erred in determining that Minn.Stat. § 514.02 (2000) violates the constitutional prohibition against imprisonment for debt. The statute criminalizes a contractor’s misapplication of funds paid by a homeowner for an improvement to real estate, not the failure to pay a debt owed to a subcontractor. We therefore reverse and remand to the district court to reinstate the eight counts of the complaint that alleged violations of this statute and that were dismissed by the district court.

Reversed and remanded.

      . In Duluth Superior Erection, Inc. v. Concrete Restorers, Inc., 665 N.W.2d 528, 538 (Minn.App.2003), this court concluded that, in the civil context, the "plain meaning” of the 2000 amendment is that "section 514.02 does not create a fiduciary liability” and that it must be considered a contract action.

      . In any event, respondent fails to show that the statute on its face "prohibits constitutionally protected activity, in addition to activity that may be prohibited without offending constitutional rights.” State v. Machholz, 574 N.W.2d 415, 419 (Minn.1998). The court in Reps similarly rejected a due process challenge on void-for-vagueness grounds and concluded that the proscribed conduct was clear: “the statute's terms are violated if a defendant has received payment and has failed to undertake any one of the three courses of action required by the statute within 15 days after he becomes aware of the costs of labor, skill, material, and machinery contributed to that improvement remain unpaid.” Reps, 302 Minn, at 48, 223 N.W.2d at 787. Thus, Minn. Stat. § 514.02 is not unconstitutionally vague or overbroad.


author: GORDON W. SHUMAKER, Judge.

text:
    STATE of Minnesota, Respondent, v. Todd SKIPINTHEDAY, Appellant.
    No. A04-1293.
    Court of Appeals of Minnesota.
    Sept. 27, 2005.

      Mike Hatch, Attorney General, James B. Early, Assistant Attorney General, St. Paul, MN; and Michelle Dietrich, Redwood County Attorney, Redwood County Courthouse, Redwood Falls, MN, for respondent.
    John M. Stuart, State Public Defender, Philip Marrón, Assistant Public Defender, Minneapolis, MN, for appellant.
    Considered and decided by KALITOWSKI, Presiding Judge; SHUMAKER, Judge; and MINGE, Judge.
   OPINION

GORDON W. SHUMAKER, Judge.

Appellant challenges his sentence on three counts of being an accomplice after the fact. Appellant argues that there were not multiple victims of his three offenses, even if there were multiple victims for the offenses committed by the principals, and that because the conduct was part of a single behavioral incident, appellant could be sentenced on only one count. Because we hold that the victims of the principal offenses are not victims of appellant’s crimes, the single-behavioral-incident rule applies and appellant can receive only one sentence for his three convictions. We affirm in part, reverse in part, and remand.

FACTS

On July 12, 2003, appellant Todd Ski-pintheday, James Mata, Itanca Henry, and Kimberley Berry drove from Minneapolis to the Redwood Falls area. Skipintheday brought a bag of clothing into which Mata put a pistol and ammunition.

The group obtained a motel room in Morton, where they initially left the pistol. They retrieved the pistol later when they decided to go to a party where they knew members of the Native Mob street gang would be present. Mata and Henry were members of the Native Gangster Disciples, a rival gang.

At the party, Henry and Mata argued with Hunter Parker, Michael O’Brien, and Jarvis Wabasha. Ultimately, Parker, O’Brien, and Wabasha were shot. Waba-sha died from his wounds. Skipintheday was present during the arguments and shootings but did not participate in them.

After the shootings, Henry, Mata, Berry, and Skipintheday fled in a car that Berry drove. Skipintheday yelled to her, “Let’s get out of here. We got to go.” And he advised her that, “You didn’t see anything.” Skipintheday noticed that Mata had a pistol different from the one he had brought to the party.

The police stopped the fleeing car. Ski-pintheday removed the ammunition from the pistol and hid it and the gun in separate locations in the car. When the police questioned Skipintheday, he denied involvement in the shootings and any gang connections, and he misidentified Itanca Henry as Robert Henry to protect him from an outstanding federal arrest warrant.

The state charged Skipintheday with several crimes relating to the shootings. He entered a plea agreement under which he pleaded guilty to being an accomplice after the fact to first-degree murder, attempted second-degree murder, and first-degree assault for the benefit of a gang. Each charge related to a different victim. The remaining charges were to be dismissed, and there was no agreement as to sentencing.

In his plea, Skipintheday admitted that he hid the gun and ammunition and that he gave false statements to the police with the intention of aiding those who had done the earlier shootings.

Because these accomplice-after-the-fact crimes were not ranked under the Minnesota Sentencing Guidelines, the district court assigned the following rankings: (1) assault in the first degree for the benefit of a gang — Level VII; (2) murder in the first degree — Level VIII; and (3) attempted murder in the second degree — Level VIII. The court then sentenced each crime consecutively because each involved a separate victim. The sentences were for 48 months, 52 months, and 48 months respectively, for a total of 148 months.

On appeal, Skipintheday challenges the propriety of consecutive sentencing and of the enhanced sentence for a crime committed for the benefit of a gang.

ISSUES

1. Appellant pleaded guilty to being an accomplice after the fact to first-degree murder, attempted second-degree murder, and first-degree assault, involving three separate victims and arising out of the same behavioral incident. The court imposed three consecutive sentences under the multiple-victim exception to the single-behavioral-incident rule.

Did the court properly determine that the victims of the principal crimes were also victims of the after-the-fact crimes?

2. Was it proper for the court to enhance a sentence on the ground that the crime was for the benefit of a gang without allowing appellant to have the facts supporting the enhancement determined by a jury?

ANALYSIS

A district court’s sentencing decision will be overturned on appeal only if there has been a clear abuse of the court’s discretion. State v. Schmit, 601 N.W.2d 896, 898 (Minn.1999).

Skipintheday argues that the district court abused its discretion in various respects in imposing consecutive sentences. He contends that his crimes constituted a single behavioral incident to which no exception applies; that his crimes were not crimes against persons but were against the administration of justice; and that the court improperly determined that he committed accomplice after the fact to an assault committed for the benefit of a gang. He argues that his sentences should be vacated and the matter remanded for re-sentencing.

1. Single Behavioral Incident

When a person’s conduct constitutes more than one criminal offense, he may be punished for only one of the offenses. MinmStat. § 609.035, subd. 1 (2002). The purpose of the statute is to limit punishment to a single sentence when a single behavioral incident results in the violation of multiple criminal statutes. State v. Brown, 597 N.W.2d 299, 305 (Minn.App.1999), review denied (Minn. Sept. 14,1999).

Skipintheday pleaded guilty to being an accomplice after the fact to three crimes. An accomplice after the fact is someone who, among other things, intentionally aids a criminal by concealing evidence of a crime, providing misleading information about a crime, or otherwise obstructing the investigation or prosecution of a crime. Minn.Stat. § 609.495, subd. 3 (2002). Skipintheday admitted that, after the shootings, he made false statements to the police and he hid Mata’s pistol and ammunition. He admitted that he did these things intentionally to aid the participants in the shootings. It is clear that Skipinthe-day’s after-the-fact conduct constituted a single behavioral incident. The state concedes this, and the district court did not find otherwise. Thus, Skipintheday is entitled to a single sentence unless an exception to Minn.Stat. § 609.035 (2002) applies.

2. Multiple-Victim Exception

The courts have created an exception to Minn.Stat. § 609.035 which allows the imposition of multiple sentences despite the existence of a single behavioral incident if the offenses involve multiple victims. State v. Bertsch, 689 N.W.2d 276, 286 (Minn.App.2004). The district court applied this exception in sentencing Ski-pintheday because each count to which he pleaded guilty involved a separate victim.

Skipintheday argues that the multiple-victim exception does not apply because none of the victims of the shootings were directly harmed by Skipintheday’s after-the-fact conduct. The state contends that no authority requires direct harm before a person may be classified as the victim of a crime.

We do not see the concept of “victim” as turning on whether harm is direct or indirect. Absent a statutory or caselaw definition of the word, we turn to a common lexical meaning: A victim is a person harmed by a crime, tort, or other wrong. Black’s Law Dictionary, 1561 (7th ed.1999). Applying that definition, the harm to O’Brien, Parker, and Wabasha occurred when the crimes against them occurred. And those crimes were completed before Skipintheday did the acts that constituted his crimes. None of the shooting victims were harmed any further, either directly or indirectly, by Skipinthe-day’s after-the-fact conduct. Thus, there were no personal victims of Skipintheday’s crimes, and, therefore, there could not be multiple victims of his crimes. Rather, we agree with Skipintheday’s argument that his crimes were against the administration of justice and not against specific persons.

The plain sense of section 609.495, subd. 3, is that certain after-the-fact conduct offends the justice system by thwarting the detection, investigation, or prosecution of a crime. Harm to a victim is inflicted when a crime is committed against that victim. That is so whether or not the perpetrator is ever apprehended or prosecuted or convicted. And that harm is addressed through the specific criminal penalties provided in the statute defining the crime that was committed against the victim. Although personal harm to a crime victim cannot be undone by the mechanisms of the law, the core value of justice can be vindicated if the criminal is punished for his nefarious act. Section 609.495, subd. 3, addresses the harm that may be done to society as a whole when after-the-fact conduct obstructs or burdens the vindication of the core value of justice.

We note also that a person can be liable for the crimes of another if the person was an accomplice of the other. Minn.Stat. § 609.05, subd. 1 (2002). But the supreme court has held that an accessory after the fact is not an accomplice of the principal. State v. Swyningan, 304 Minn. 552, 555, 229 N.W.2d 29, 32 (1975). See also State v. Leja, 660 N.W.2d 459, 466 (Minn.App.2003) (holding that it is impossible as a matter of law for a principal to also be guilty of being an accomplice after the fact), rev’d on other grounds, 684 N.W.2d 442 (Minn.2004); State v. Sullivan, 77 N.J.Super. 81, 90, 185 A.2d 410, 415 (1962) (stating “[a]n accessory after the fact ‘cannot be charged, or punished as the principal offender. His offense is distinctly his own, and he is liable to a different punishment. ...’ ”) (citation omitted); People v. Hartford, 159 Mich.App. 295, 299, 406 N.W.2d 276, 278 (1987) (a defendant may not be convicted of the principal offense of murder and as an accessory after the fact to the same murder).

Because there were no personal victims of Skipintheday’s after-the-fact crimes and because he cannot be held liable for the crimes that did involve multiple victims, the district court erred in imposing separate sentences for the offenses to which Skipintheday pleaded guilty.

3. Crimes Against Persons

The state argues that the crimes to which Skipintheday pleaded guilty were crimes against persons and therefore may be sentenced consecutively. See Minn. Sent. Guidelines II.F. But because we have concluded that separate sentences were not permissible, we need not determine whether they were properly made consecutive. In any event, we would apply the multiple-victim exception and would reject the state’s argument on that basis.

4. Sentencing Issues

a. Crime Subject to Sentencing

Because we have determined that Skipintheday’s three crimes arose out of a single behavioral incident to which the multiple-victim exception does not apply, the district court may properly impose only one sentence, even though all three convictions may stand. See State v. Papadakis, 643 N.W.2d 349, 358 (Minn.App.2002) (when criminal conduct arises from a single behavioral incident, multiple convictions are permissible but multiple sentences are not).

Although Minn.Stat. § 609.035 does not specify which of the multiple convictions is to be sentenced, sentencing policy contemplates that the court will sentence the conviction that carries the highest penalty:

The policy underlying [Minn.Stat. § 609.305] appears to be that where the statute is applicable and defendant is convicted of multiple offenses, as a practical matter a single sentence will necessarily take into account all violations, and imposing up to the maximum punishment for the most serious offense will include punishment for all offenses.

State v. Johnson, 273 Minn. 394, 399, 141 N.W.2d 517, 522 (1966).

Presuming that the district court will impose a sentence that reflects this policy, the most serious offense is that of accomplice after the fact to murder in the first degree. But see State v. Alt, 529 N.W.2d 727, 731 (Minn.App.1995) (referring to Minn.Stat. § 609.035, the court of appeals said: “We conclude that the statute was not intended to limit the trial court’s discretion in choosing the conviction on which to impose sentence.”).

b. Severity Level

In the sentencing of a felony in Minnesota, the district court must impose the presumptive sentence for that crime under the Minnesota Sentencing Guidelines unless there are substantial and compelling reasons to depart from that sentence. Minn. Sent. Guidelines II.D. The presumptive sentence is the product of calculating the offender’s criminal-history score and applying the severity level of the crime according to a sentencing grid. Id., II.C.

But here the crime of accomplice after the fact has not been given a severity-level ranking. Minn. Sent. Guidelines cmt. II. A.03. Thus, it was within the district court’s discretion to determine an appropriate severity level. For the crime of accomplice after the fact to murder in the first degree, the district court assigned a severity level of VIII out of a possible 11 severity levels. In doing so, the district court relied on the guidance provided in State v. Kenard, 606 N.W.2d 440 (Minn.2000).

The district court made a thorough analysis of the gravity of the conduct underlying the unranked offense, the similarity of ranked offenses, the conduct and severity level assigned to other offenders for this offense, and the severity level assigned to others who have engaged in similar conduct. See id. The district court considered in detail the culpability of Ski-pintheday, reviewed other caselaw on the issue of sentencing this unranked offense, and applied statistical factors to determine the general pattern of sentences pertinent to the issue before it. The district court’s thoughtful consideration of the ranking issue in the context of the purposes of the sentencing guidelines and its rational application of the principles underlying the guidelines to the crime to be sentenced, amply demonstrate that the district court did not abuse its discretion in concluding that the appropriate severity level for accomplice after the fact to first-degree murder is level VIII.

c. Benefit-of-a-Gang Enhancement

Of the three crimes to which Ski-pintheday pleaded guilty to being an accomplice after the fact, only the assault was charged as being committed for the benefit of a gang. However, Skipintheday was not charged with after-the-fact conduct for the benefit of a gang. See generally State v. Chuon, 596 N.W.2d 267, 270 (Minn.App.1999) (holding crime committed for the benefit of a gang is a substantive criminal offense), review denied (Minn. Aug. 25, 1999). Nevertheless, the district court applied a 12-month enhancement to the after-the-fact assault conviction. The state concedes that it was improper for the district court to add the enhancement, but argues that the court could nevertheless consider gang-related conduct in ascertaining the severity level of the unranked after-the-fact crime. The state asks for a remand for that purpose.

We have determined that the district court’s severity ranking of the only crime as to which it can properly impose a sentence was within the district court’s discretion. And no enhancement of that sentence would be proper because Ski-pintheday would have a right to have a jury decide the facts supporting that enhancement. Blakely v. Washington, 542 U.S. 296, 124 S.Ct. 2531, 159 L.Ed.2d 403 (2004).

DECISION

The district court erred in imposing three sentences for acts that were part of a single behavioral incident and in enhancing one sentence for a crime committed for the benefit of a gang. Those sentences are reversed. The district court properly exercised its discretion in assigning a severity level to the most serious of the three crimes and that determination is affirmed. The matter is remanded for re-sentencing on a single count.

Affirmed in part, reversed in part, and remanded.